Financial appraisal of investments with unequal economic life in logistics

Companies in the logistics sector are often faced with the need for financial appraisal of investments with unequal economic life, which most often refers to the acquisition of fixed assets. Methods of financial valuation, such as net present value or internal rate of return, are not adequate for application in such a case. The aim of this paper is to present methods for valuation of investments with unequal economic life, which include the replacement chain method, the equivalent annual annuity approach and the method of reinvesting net cash flows. Their practical application is shown on the example of a logistics company facing the challenge of procuring a new forklift. The company needs to make a choice between four alternatives with unequal economic lives: a counterbalance, side loader, reach trucks, or automated forklift.