A piece of construction equipment for a contractor costs $45,000 to purchase.Fuel, oil, grease and minor maintenance are estimated to cost $12.34 for each hour that the equipment is used. The tires cost $3,200 to replace (estimated to occur every 2,800 hours of use), and major repairs of $6,000 are expected after 4,200 hours of use. The piece of equipment is expected to last for 8,400 hours, after which it will have an estimated salvage value of 10% of its purchase price. How much should the owner charge per hour of use, if she expects to use the equipment 1,400 hours per year? Major repairs and tire replacement will not be done at the end of the equipment's service life. Assume an interest rate of 15%.

A piece of construction equipment for a contractor costs $45,000 to purchase.Fuel, oil, grease and minor maintenance are estimated to cost $12.34 for each hour that the equipment is used. The tires cost $3,200 to replace (estimated to occur every 2,800 hours of use), and major repairs of $6,000 are expected after 4,200 hours of use. The piece of equipment is expected to last for 8,400 hours, after which it will have an estimated salvage value of 10% of its purchase price. How much should the owner charge per hour of use, if she expects to use the equipment 1,400 hours per year? Major repairs and tire replacement will not be done at the end of the equipment's service life. Assume an interest rate of 15%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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