#4 only

1. Conditions: Your company has just been awarded a large earthmoving contract that would be well suited for a Caterpillar 950H tire loader to load trucks with. A local rental yard said that they would supply you with the loader for $75.00 per hour plus $7 sales tax. The rental rate and tax do not include any operating costs. To make a decision, you need to analyze what it would cost your company to purchase the loader instead of renting it. The purchase price, including sales tax and attachments, is $500,000. The project will last five years, and you are not sure that you will have work for the loader after this project; therefore, you need to plan on selling it at the end of 5 years for 30% of the purchase price as the salvage value. According to the schedules that the project managers have put together, it appears that you will be able to get 1,500 hours of utilization per year on the loader during all five years, and they also anticipate 50 minute efficiency working hours. According to the Chief Financial Officer of the company, your cost of money (interest rate for the Cost of Capital) is 8% per year, and the insurance on the loader will be $2500 per year. Your tire salesperson says that a set of four tires will cost $15,000.00, last 1,500 hours, and the average tire repairs will be about 15% of the tire purchase price per year. The preventative maintenance schedule that your fleet is on has PM1 oil changes completed every 250 hours with oil, lube, and filter cost at $30.00 per gallon, the repair and maintenance cost is $10 per hour, and your throttle load factor for the loader is 60%. The loader will be scraping the ground about 50% of the time with high wear ground engaging cutting edges that cost $1000 per set and will last 500 hours performing this application before they wear out. Net Flywheel Horse Power is 250hp, and the fuel consumption rate is 0.035gal/fwhp - hr. Engine crankcase capacity is 10 gallons and uses quantity consumed formula 2.12 on the textbook page 39 . Offroad diesel fuel cost is $3.5 per gallon. 2. Problems: 1) What is the ownership cost per hour? (5 points) 2) What is the operating cost per hour? (5 points) 3) Assuming that the rental cost does not include the operating costs. What does it the actual cost of using the rental machine per hour? Include the tax for the rental ownership cost. ( 5 points) 4) What does it actual cost to use the purchased machine per hour (ownership costs + operating costs)? (5 points)