This dissertation develops an economic equipment replacement model suitable for Flexible Manufacturing Systems (FMSs). An FMS represents an integrated machining system which produces multiple products and utilizes multiple inputs including avital materials handling system. The system's interactive nature defies traditional replacement works which are confined to one-for-one as well as like-for-like situations. The model developed in this work addresses the issue of multiple machine replacement. Considerations incorporated include layout, transportation, materials handling capacity, flexibility, capacity expansion/contraction, obsolescence and deterioration, inputs substitution, and equipment depreciation. This model is demand driven. The optimality criterion is the maximization of the after-tax future worth of the system at the end of a specified planning horizon. The 1983 ACRS rules are used. Illustrative examples are provided throughout. / Ph. D.