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Can a new replaced asset be more productive than an older one?

Capital budgeting is deemed as the decisions of analyzing future investments and how such assets will increase future profits. Capital budgeting can be a risky investment but turn a greater profit.The U.S. Navy uses capital budgeting everyday, but in particular we can focus primarily on the force cutting investments. Every year spending in the military is more and more scrutinized. Since the military has a mission first slogan and the current state of technology today, less bodies are needed to perform such jobs machines and technology can also perform. To save funding for the future the services are letting service men and women out either voluntary or involuntary. The overall costs of a human being greatly outweigh the overall cost of a machine which have a shorter useful life and easily replaced. The military are also at times leasing some of the machines instead of purchasing them, which in turn has a substantial influence on future spending on other items of asset. Being that the services are leasing items and purchasing others, the items that are leased are having a greater rate of return for the defense contractors whom are leasing these products to the military. For instance, the Navy may lease diesel engines from Lockheed Martin. What the U.S. Navy pays at the beginning of the lease added to what the ending book value of the engines are at the end of its useful life divided by 2 is basically the defense contractor's rate of return.   

Wild, J. J. (2013). Financial and Managerial Accounting. New York : Mcgraw-Hill.

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Capital budgeting is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure debt, equity or retained earnings. It is the process of allocating resources for major capital, or investment, expenditures.One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders. Capital budgeting usually involves the calculation of each project's future accounting profit by period, the cash flow by period, the present value of the cash flows after considering the time value of money, the number of years it takes for a project's cash flow to pay back the initial cash investment, an assessment of risk, and other factors. Capital budgeting is a tool for maximizing a company's future profits since most companies are able to manage only a limited number of large projects at any one time.

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