CALCULATION GUIDE
How to Build a Capital Replacement Reserve
Turn component ages and replacement forecasts into a funding plan.
Calculation approach
List major components, current age, remaining useful life and current replacement cost. Inflate costs to the expected replacement year and compare the requirement with existing reserves and annual contributions.
How to use the result
Review the plan after inspections and completed work. A reserve is strongest when component assumptions can be traced to actual condition and recent pricing.