Answer is C: To maintain an average equipment age of 4 years (median age—half older and half newer than 4 years) you must replace 12.5% of your fleet each and every year. In this case, you also sell off this same amount of old equipment each year (at original cost) in order to maintain your overall original fleet cost.

So, if you have a fleet that is $1,000,000 at first cost, you would purchase $125,000 of new equipment each year and sell off $125,000 of used equipment (at its original first cost) each year. After 4 years, half of your fleet will be 4 years old or newer and half will be older than 4 years for an average (median) fleet age of 4 years (12.5% X 4 years = 50%).

This calculation is based on total fleet value, not the quantity of individual items.