Hospitals in Taiwan are tightening up their spending due to unprecedented competition in medical industry and the new medical insurance payment policy. Since medical equipment in hospital is very expensive, its effect on financial position of the hospital is enormous. Thus it becomes a serious issue of making capital investment and equipment replacement decisions. This study proposes a systematic approach, which applies a multiple criteria decision model-Analytical Hierarchy Process, to help decision makers of hospitals in making appropriate capital investment decision. At the end we use a real case to demonstrate how this systematic approach is applied.