Physical Asset Life Cycle Evaluation Models—A Comparative Analysis towards Sustainability

José Torres Farinha (), Hugo D. N. Raposo, J. Edmundo de-Almeida-e-Pais and Mateus Mendes
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José Torres Farinha: RCM 2+ —Research Centre in Asset Management and System Engineering, 3030-199 Coimbra, Portugal
Hugo D. N. Raposo: RCM 2+ —Research Centre in Asset Management and System Engineering, 3030-199 Coimbra, Portugal
Mateus Mendes: RCM 2+ —Research Centre in Asset Management and System Engineering, 3030-199 Coimbra, Portugal

Sustainability, 2023, vol. 15, issue 22, 1-23

Abstract: In order to reach a sustainable circular economy, it is important to maximise the life cycle of a Physical Asset. An evaluation of a Physical Asset Life Cycle can be conducted via several approaches, and these may provide different results. The differences may be insignificant, but they must be taken into consideration because they have consequences for a manager’s decisions. This allows for a wider time interval to decide when to withdraw a Physical Asset or renew it and/or if it ought to continue functioning when profits are higher than expenses, thus allowing for a reduction in waste and increase in sustainability. These are some of the aspects that are discussed in this paper; it presents several models for the evaluation of the Physical Asset Life Cycle, considering the market value, devaluation methods and a more generalised use of Fisher’s Equation, which can include the Risk Tax, among others. The results are discussed based on data that support evaluations obtained with the models, and these are used for each Life Cycle model with the aim of evaluating the differences among them. Not only do all of the models consider expenses, namely those in Investment and Functioning, but also profits, which allows for a more holistic evaluation of the Physical Asset Life Cycle. The models are significantly versatile, allowing for a quantitative evaluation of changes in maintenance policies, energy price variations, risks, variations of profits according to the real market and so on. The results demonstrate the robustness of the approach described and indicate that it maximises the Physical Asset Life Cycle, allowing for the consumption of world resources to be minimised and, as a result, contributing to a more sustainable world.

Keywords: physical assets; life cycle models; Fisher’s equation; life cycle; risk tax; apparent rate (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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