Pushem Down clearing contractors purchases a dozer with a delivered price of $275,000. The company believes it can sell the used dozer after four years (2000 hours/yr) of service for $56,000. There will be no major overhauls. The company's cost-of-capital is 9.2% and its tax rate is 33%. Property taxes, insurance, and storage will run 4%. What is the owning cost for the dozer? Use the time value method to calculate the depreciation portion of the ownership cost.

Pushem Down clearing contractors purchases a dozer with a delivered price of $275,000. The company believes it can sell the used dozer after four years (2000 hours/yr) of service for $56,000. There will be no major overhauls. The company's cost-of-capital is 9.2% and its tax rate is 33%. Property taxes, insurance, and storage will run 4%. What is the owning cost for the dozer? Use the time value method to calculate the depreciation portion of the ownership cost.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 11PROB

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