Open Cow Replacement Decisions: an Application of Asset Replacement Theory

Beef producers must decide what to do with a cow that fails to conceive during the breeding season. Keeping the open cow results in a years expenses without any revenue. Replacing the open cow with a bred heifer provides immediate revenue although it will take a few years before the heifer reaches peak productivity. A net present value framework is employed to examine this decision. The problem is unique because the open cow and the replacement heifer have different life spans. Finding a common timeframe is impossible since both alternatives will eventually employ replacement heifers if a long enough time frame is considered.