solve manually (25Pts,) 2. A local construction com tractor for dirt scraping an
ID: 2594233 • Letter: S
Question
solve manually
(25Pts,) 2. A local construction com tractor for dirt scraping and leveling. The tractor has the following estimatest initial cost of $75,000, a life expectancy of 15 years, a $5,000 salvage value, an operating cost of $30 per day, and an annual maintenance cost of $6,000. Alternatively, the construction company can lease the same tractor and a driver as needed for $210 per day. The company has a MARR of 12% per year. Compute the number of days per year that the scraper would be required to justify its purchase. pany is considering the purchase of a small-loadExplanation / Answer
Purchase Lease Initial cost $ 75000 Life expectancy Years 15 Salvage value $ 5000 Operating cost $/day 30 Annual maintenance $ 6000 Assumption- annual usage days 60 Days 60 Annual depreciation $ 5000 Total annual costs $ 12800 $ per day 210 12600 Revenue required to recover annual costs $ 12800 $ 12600 The annual cost of owning the machine is lesser than the Lease cost. assuming usage for minimum 60 days per year, it is justifiable to purch. Any usage beyond this will reduce costs relative to the lease alternative as shown in table below Purchase Lease Initial cost $ 75000 Life expectancy Years 15 Salvage value $ 5000 Operating cost $/day 30 Annual maintenance $ 6000 Assumption- annual usage days 100 Days 100 Annual depreciation $ 5000 Total annual costs $ 14000 $ per day 210 21000 Revenue required to recover annual costs $ 14000 $ 21000 Purchase Lease Initial cost $ 75000 Life expectancy Years 15 Salvage value $ 5000 Operating cost $/day 30 Annual maintenance $ 6000 Assumption- annual usage days 220 Days 220 Annual depreciation $ 5000 Total annual costs $ 17600 $ per day 210 46200 Revenue required to recover annual costs $ 17600 $ 46200
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