cost $315,000 to purchase. Fuel, oil, grease, and minor maintenance are estimated to cost $53.50 per operating hour. A set of tires cost $16,000 to replace, and their estimated life is 3,100 use hours. A $17,000 major repair will probably be required after 6,200 hr of use. The machine is expected to last for 9,300 hr, after which it will be sold at a price (salvage value) equal to 13% of the original purchase price. A final set of new tires will not be purchased before the sale. How much should the owner of the machine charge per hour of use, if it is expected that the machine will operate 3,100 hr per year? The company's cost-of-capital rate is 7.25%.

cost $315,000 to purchase. Fuel, oil, grease, and minor maintenance are estimated to cost $53.50 per operating hour. A set of tires cost $16,000 to replace, and their estimated life is 3,100 use hours. A $17,000 major repair will probably be required after 6,200 hr of use. The machine is expected to last for 9,300 hr, after which it will be sold at a price (salvage value) equal to 13% of the original purchase price. A final set of new tires will not be purchased before the sale. How much should the owner of the machine charge per hour of use, if it is expected that the machine will operate 3,100 hr per year? The company's cost-of-capital rate is 7.25%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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A machine cost $315,000 to purchase. Fuel, oil, grease, and minor maintenance are
estimated to cost $53.50 per operating hour. A set of tires cost $16,000 to replace, and
their estimated life is 3,100 use hours. A $17,000 major repair will probably be required
after 6,200 hr of use. The machine is expected to last for 9,300 hr, after which it will be
sold at a price (salvage value) equal to 13% of the original purchase price. A final set of
new tires will not be purchased before the sale. How much should the owner of the
machine charge per hour of use, if it is expected that the machine will operate 3,100 hr
per year? The company's cost-of-capital rate is 7.25%.

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