You have been asked to give an economical assessment based on ownership cost and operating cost ($/hr) of a loader with the purchase price of $350000. Using straight line depreciation method, the machine is expected to be used for 5 years and is expected to be sold for $60000 at the end of the 5th year. A set of tires for this loader, which should give 3000 hrs of service, cost $36000. The annual cost of repairs equals 75% of the straight-line machine depreciation. Tire repair is 16% of tire depreciation. The loader is expected to work 1500 hr/yr. The oil consumption of the loader is 0.237gal/hr and fuel consumption of the loader is 7.215gal/hr; oil is $3.00/gal and fuel cost $1.15/gal. The cost of other lubricants and filters is $0.65/hr. The annual interest rate is 7%. a) What is the cost per hour of owning the loader? $ /hr (keep 2 decimal places) b) What is the hourly repair cost of the loader? $ /hr (keep 2 decimal places) c) What is the hourly cost of the tire repair and replacement(s)? (disregard the salvage values of the tires) $ /hr (keep 2 decimal places) d) What is the total hourly cost of operating this loader (calculate operation cost only)? $ /hr (keep 2 decimal places)

You have been asked to give an economical assessment based on ownership cost and operating cost ($/hr) of a loader with the purchase price of $350000. Using straight line depreciation method, the machine is expected to be used for 5 years and is expected to be sold for $60000 at the end of the 5th year. A set of tires for this loader, which should give 3000 hrs of service, cost $36000. The annual cost of repairs equals 75% of the straight-line machine depreciation. Tire repair is 16% of tire depreciation. The loader is expected to work 1500 hr/yr. The oil consumption of the loader is 0.237gal/hr and fuel consumption of the loader is 7.215gal/hr; oil is $3.00/gal and fuel cost $1.15/gal. The cost of other lubricants and filters is $0.65/hr. The annual interest rate is 7%. a) What is the cost per hour of owning the loader? $ /hr (keep 2 decimal places) b) What is the hourly repair cost of the loader? $ /hr (keep 2 decimal places) c) What is the hourly cost of the tire repair and replacement(s)? (disregard the salvage values of the tires) $ /hr (keep 2 decimal places) d) What is the total hourly cost of operating this loader (calculate operation cost only)? $ /hr (keep 2 decimal places)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 22P: The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500,...

See similar textbooks

Similar questions

The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
You have just bought a new pusher dozer for your equipmentfleet. Its cost is $100,000. It has an estimated servicelife of four years. Its salvage value is $12,000.a. Calculate the depreciation for the first and second yearusing the straight-line and DDB methods.b. The IIT components of ownership cost based on averageannual value are:Tax: 2%Insurance: 2%Interest: 7%What cost per hour of operation would you charge tocover IIT?
Evaluate and select the best purchase of the following vehicles using straight line depreciation, a tax rate of 25%, and an after-tax MARR of 9% per year: Vehicle A: Cost = $20,000, Salvage Value= $5000, Annual operating cost = $1000, Life = 6 years Vehicle B: Cost = $15,000, Salvage Value = $2000, Annual operating cost = $1200, Life = 6 years %3D **Remember that this is based on Chapter 12, not the Park chapter, so no opportunity cost needs to be considered, this is a straight PVW comparison after taxes***
Your plant manager wants you to buy a new lathe for $410000. The lathe should be useful to your company for 8 years at which point you plan to replace. The estimated salvage value at the end of the useful life is $20000. Using straight line depreciation what is the Book value when the asset is sold?
A new machine costs $160 000, has a useful life of 10 years, and can be sold for $15 000 at the end of its useful life. It is expected that $5000 will be spent to dismantle and remove the machine at the end of its useful life. Determine the straight-line depreciation schedule for this machine. Solve for the Accumulated Depreciation per year and Book Value at the end of each year and summarize using a table by: a) Straight Line Method, b) Sinking Fund Method (i=10%), c) Sum-of-Years-Method d) Declining Balance Method and e) Double Declining Balance Method.
A machine has a first cost of $10,000 and an expected salvage value of $900 when it is sold. Annually, the operating cost is $500, and the revenue generated from sales is $2,500. What is the payback period assuming a MARR of 20% per year, an effective tax rate of 15%, and straight line depreciation over 5 years taking into account the salvage value (note, even though the machine might be fully depreciated down to its salvage value for tax purposes, assume the machine can continue to operate forever and that it will never be sold).
The data associated with operating and maintaining an asset are shown below. The company manager has already decided to keep the machine for 1 more year (i.e., until the end of year 1), but you have been asked to determine the cost of keeping it 1 more year after that. At an interest rate of 10% per year, estimate the AW of keeping the machine from year 1 to year 2. Operating Cost, $ per Year Market Value, $ 30,000 25,000 14,000 10,000 Year 0 1 2 3 -15,000 -15,000 -15,000
A computer system can be purchased for $18,000. The operating costs will be $10,000 per year, and the useful life is expected to be 5 years with a $5,000 salvage value at that time. The present annual sales volume should increase by $16,000 as a result of acquiring the system. Assume the company's tax rate is 50%. Using a straight-line deprecation method, compute annual taxes and IRR for the investment. Rework the previous problem assuming (i) the system's taxable life is 8 years with a salvage value of $2,000, but that (ii) the company still salvages the system after 5 years for $5,000. Describe how this may affect cash flow in the forthcoming years.
help me
A commercial company plans to buy the device for $ 20,000 and is expected to sell it for $ 8,000 in the future.The useful life of the device is estimated at 8 years. It is desirable to calculate the depreciation of first year using Straight line depreciation.
Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 25% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) Year 1 2 3 4 Book values at end of year 4 SL $ 150% DB $ 200% DB $ $ C Cost Item Hardware Training Installation Cost $165,000 $16,000 $14,000
A machine, purchased for$50,000, has a depreciable life of five years. It will have an expected salvage value of $4,500 at the end of the depreciable life. Find the yearly depreciation, Book value every year using the following methods. If the machine has a capacity of 50,000 units for its life span. What is the depreciation and book value if the machine produces 20,000 units, 15,000 units, 10,000 units, 3,000 units and 2,000 units yearly from year 1 to 5 accordingly.