Question

Question 1: (6 points) A company having a cost of capital rate of 8% purchases a $200,000 track loader. This machine has an expected service life of 5 years and will be used 2,000 hrs per year. The estimated salvage value at the end of 5 years is $40,000. Fuel, oil, grease, and minor maintenance are estimated to cost $35.00 per operating hour. No tire replacement since this is a track machine. TABLE 2.1 Economic analysis relationships Name Symbol Converts Icon Formula Single payment SPCAF given P to F (FIP, %n) (1 - 1) compound amount factor Present worth compound PWCAF given F to P (P/F%, n) 1/(1+1) amount factor Uniform series compound USCAF given A to F (FIA, 1%, n) (1+1)-1 amount factor Uniform series sinking USSFF given F to A (AIF, %, n) fund factor (1+1) - 1 Uniform series present USPWF given A to P (PIA. 7%, n) (1+1) - 1 worth factor 1(1+" Uniform series capital USCRF given P to A (AIP.7%, n) /(1+ recovery factor (1+1)" - 1 a) Calculate the annualized ownership cost. b) Calculate the annualized operating cost. c) Calculate the annualized salvage cost.

Answer 1

.) Cest of apital = 87. Machine Chack loade) = $ 200,000 3) uave e = 54 tam. vesse ite in bis 2000hrs per year perpen 5) Salvage Value = $ 40,000. Hauntenance cost $35.00 per. br. - 3) Annualved ownership cost Ownership cost includes both Variable and fixed costs when Variable costs Maintenance cost Fixed costs - Depreciation. cost of a net © Sarvoje value Deprecaton = per hour 4 $ - a Total units/his 200000 o 40,000 to 10,000 hrs 160,000 = $16 - Toooo

Uniteost tota 2000 32.000 Depreciation = $ 16 per hour . Amualized ownership costs Particulars a) Depreciation per uniths & 16 b Total deprecation his Cusage) c) Total depreciation cost / (axb) d Variable cost (Manteau) & 135.00 I per br e) Varsable bis( usage) / 2000 f) Total Variable cost (day) 102,004 : Totas Ourenslop cost & 1 per you by Operating costs they are Variable costs wits are directly related to Since $35.00 per bor for maintenane - Ihrual operating cost = 2000 x 35.00 & Fgood )

c) Amway Balvaje Cost Sauvage volue at end of - $ 40,000 Syeon Sonce there is no exact formula the larvae Values will be $ 40,000