Scenario: In a construction project, the equipment and materials are some of the

Question

Scenario:

In a construction project, the equipment and materials are some of the man resources of the main resources. The equipment may include loaders, dozers, etc. and the material may include oil, tires, spare parts, etc. A construction project leader should determine the resource required, i.e. equipment and materials required. In the following cases, the calculations to determine resource (e.g. material) requiements are faced.

You are also requested to determine the resource required of this case. Calculate

i) the hourly tire cost that should be part of machine operating cost if a set of tires can be expected to last 5,000 hr. Tire cost $38,580 per set of four. Tire repair cost is estimated to average 16% of the straight-line tire depreciation. The company's cost of capital rate is 8% if this case is not cosidering the time of value of money.

Also,

ii) Find out the future value after 2 years. You should also show that effective thinking has taken place in unfamilar contexts, i.e. calculating the tire cost in this case.

The second question is more important, because I dont know :(

Explanation / Answer

(i) Suppose, we don't consider the time value of money:

Tire repair cost = $ 38,580/5000 hrs x 16% = $1.235/hr

Tire use cost = $38,850/5000 hrs = $7.716/hr

Hence, Tire operating cost = $1.235 + 7.716 = $8.951/hr

Note: To do the second queston, it requires the service life of a machine and operating hours per year

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