MACHINERY COSTS AND INFLATION

This article addresses (1) the differences in machinery cost estimating techniques, particularly for depreciation and opportunity cost, and (2) the necessary modifications in cost estimating techniques to account for the changing monetary base under inflation. The conditions under which capital budgeting and traditional budgeting differ are examined on a before tax and after tax basis, with and without inflation. The variations in cost estimates depending upon techniques, and with and without inflation, are compared.