replacement asset value

The replacement asset value (RAV) is the dollar amount it would cost to replace the equipment assets if a disaster occurred that destroyed the entire plant. Insurance companies value buildings and equipment for replacement much like the average person secures insurance for their home and automobiles. The replacement value of the plant equipment can be used as a gauge to determine the dollar amount of MRO inventory they needed to maintain in the storeroom. With this in mind, the bestpractice inventory value for the average MRO storeroom is estimated to be in the range of 0.50 to 0.75 percent of the RAV. The RAV percentage will vary according to the industry and is usually determined by a corporate directive or expectation communicated to the plant manager.

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