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. How much is the contractor’s hourly depreciation portion of ownership cost for the loader if using the Time Value Method.
Initial price = 115,000
Cost of tires -25,000
Purchase price less tires = 90,000
Uniform series required to replace 90,000 present value
= 90,000 X (10% (1+10%)^10) / (1+10%)-1 = 90,000 X 0.162745 = 14,647.09
sinking factor to use with salvage value
= 50,000 X (10%/(1+10%)-1) = 50,000 X 0.062745 = 2196.089
portion of ownership cost = (14,647 - 2,196) / 2000 hour per year = 6.23
A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours...
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...
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...
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...
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...
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...
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...
A contractor has purchased a wheeled loader for $130,000 and expects to use the loader an average of 1,500 hours per year. Tires cost $6,000 to replace (estimated to occur after each 4,500 hours of use), and major repairs will be needed every 6,000 hours at a cost of $5,000. The contractor expects to be able to sell the loader for $10,000 after she has used it for 15,000 operating hours. Fuel, oil, and minor maintenance cost about $19.75 for...
A crawler tractor is used about 1,500 hours per year. It cost $150,000 new and has a useful life of 15,000 hours. Estimated salvage value after 15,000 hours of use is $25,000. Minimum attractive rate of return is 10%. a. What is the hourly ownership cost for the tractor? b. What do you estimate the hourly maintenance and repair cost to be if the tractor is used for general contracting under average operating conditions? c. The tractor is powered by...