
- sum of widths of the 2nd, 3th and 4th columns should be larger from width of multi column cell above their column heads (this can be simple achieve by
p{...}
columns type)
\multirow
can automaticaly break a text only if you prescribe the width of this cell. Otherwice is handy to use \makcell
macro from the package with the same name, in which you break a text by use of \\
(see MWE -- Minimal Working Example -- below):
\documentclass{article}
\usepackage{makecell, multirow}
\begin{document}
\begin{center}
\footnotesize
\renewcommand\arraystretch{1.2}
\begin{tabular}{| c | *{3}{>{\centering\arraybackslash}p{13mm}}|}
\hline
\multirow{2}{*}{\makecell{Equipment acquired\\ at start of year}}
& \multicolumn{3}{c|}{Replacement cost (\$) for given years}\\
\cline{2-4}
& 1 & 2 & 3 \\
\hline
1 & 4000 & 5400 & 9800 \\
2 & 4300 & 6200 & 8700 \\
3 & 4800 & 7100 & -- \\
4 & 4900 & -- & -- \\
\hline
\end{tabular}
\end{center}
\end{document}
You may like the following table format:

\documentclass{article}
\usepackage{booktabs, makecell, multirow}
\begin{document}
\begin{center}
\footnotesize
\begin{tabular}{ c *{3}{>{\centering\arraybackslash}p{13mm}} }
\toprule
\multirow{2}{*}{\makecell{Equipment acquired\\ at start of year}}
& \multicolumn{3}{c}{Replacement cost (\$) for given years}\\
\cmidrule{2-4}
& 1 & 2 & 3 \\
\midrule
1 & 4000 & 5400 & 9800 \\
2 & 4300 & 6200 & 8700 \\
3 & 4800 & 7100 & -- \\
4 & 4900 & -- & -- \\
\bottomrule
\end{tabular}
\end{center}
\end{document}