Question

A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The flywheel horsepower rating of the loader’s diesel engine is 105 horsepower. The interest rate is 10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel costs $1.20 per gallon.

Please calculate how many sets of tires are needed during the 10 years' of operation of this loader assuming one set of tires can be expected to last 4,000 hours, and the loader will be operated 2,000 hours per year.

Answer 1