Subject:    -5- What is my old SGI machine worth?
Date: 26 May 1993 00:00:01 CST

  Thanks to Thomas Sippel-Dau <cmaae47@imperial.ac.uk> for this
  summary:

  Since computer technology has been improving so rapidly, this is
  difficult to answer generally.  But you can take the following
  approches to get somewhere near a realistic estimate.

  1.  The Book Value.

  This assumes the computer is an investment object which is written
  down over a certain time.  At the end of this time it is assumed that
  the residual value will pay for scrapping the object, so you do not
  have to pay someone to take it away.  About 5 years seems reasonable
  for computers.

      Value   the current value
      Price   the original price
      n       the age of the machine in months
      p       depreciation rate 1.6% (for 62.5 months useful life)

  1.1 Linear method:     Value = Price * ( 1 - n * p )
  1.2 Degressive method: Value = Price * ( 1 - 2 * p ) ** n

  In the first 4 years the degressive method will give lower values.

  Once the degressive monthly depreciation is lower than the linear
  one, you should sell the machine and buy a new one, otherwise you pay
  more tax than you need to (talk to your accountants first, they
  should know the exact depreciation rate and method).

  2.  Comparative method.

  Get the new price of a similar current machine.  Multiply the current
  price by any usefulness multipliers.  For example:

      An Indigo R3000 server costs $8000 (N.B. NOT the real price)
      An Iris 4D/25 is about half the speed of it

      Then the current value of the 4D/25 cannot be more than $4000
      regardless of what the book value says.

  For this you must strip or enhance the machine to a current standard.

  Say you take the price of an Indigo with 432 disk Mbyte and 16 Mbyte
  memory to assess the residual value of a 4D/25 with eight Mbyte
  memory and 330 Mbyte hard disk.  You will arrive at the price after
  you have upgraded the the 4D/25 to 16 Mbyte.

  Since both machines are not very useful (stand alone) with so little
  disk space, you can allow for the difference in disk space when you
  calculate the price of the whole running system.

  For this method the old system must be able to run current software
  usefully.  A system that does not run current software has no value,
  but see below.

  You should also take account of the maintenance cost for about three
  years, which is when a system you buy now would be due for
  replacement according to  the book value method.

  3. Components and options.

  You can view the system as an assembly of useful parts, such as
  monitor, keyboard, disk drives, system box, electronics module.  If
  you have extra memory or disks (over and above the currently useful
  minimum), you can value them at about 80% of the price you currently
  have to pay third party suppliers.

  4. Residual use value.

  If you can find a dedicated use for an old general purpose machine,
  then this could give you a final number.  However, you need to allow
  for any work you have to put in to get to that state, and to keep the
  system there.  You will also find that only reasonably large
  organisations have such dedicated uses.

  Finally, a word about maintenance:

  If you have one system only, and you cannot afford to lose it, you
  need to take maintenance, regardless of how much it is.  From about 5
  systems you can save yourself maintenance if you can afford to lose
  the odd system and load its uses onto the remaining ones.  But
  remember that rescheduling people often meets resistance, and keeping
  people idle because of a system failure is extremely expensive.