13.5 A tractor has a first cost of $40,000, a monthly op erating cost of $1500,

Question

13.5 A tractor has a first cost of $40,000, a monthly op erating cost of $1500, and a salvage value of $12,000 in 10 years. The MARR is 12% per year. An identical tractor can be rented for $3200 per month (operating cost not included). If n is the minimum number of months per year the tractor must be used in order to justify its purchase, the relation to find n is represented by: (a) -40,000(A/P, 1 %, 10)-1500n (b) (c) (d) + 12,000(A/F,1%, 10) = 3200n -40,000(A/P,12%,10)-1500n + 12,000(A/F,12%, 10) = 3200n -40,000(A/P, 1%,120)-1500n + 12.000(A/F, 1%,120) = 3200n -40,000(A/P, 11.4%, 10)-1500n t 12,000(A/F, 11.4%, 10-3200n

Explanation / Answer

13.5. Since the operating cost is monthly, n = 12 x 10 years = 120. And i = 12/12 = 1%.

The relation to find n = (A/P,1%,120)

(c) -40,000(A/P,1%,120) – 1500n + 12,000(A/F,1%,120) = 3200n.

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