5.10) Use Method 2 (time-value-of-money equations for ownership costs) to determine the probable cost per hour of owning and operating a track-type unit of equipment. The following conditions apply.

Total delivered price: $220,000

Salvage value: $75,000

Useful life: 6 yr

Hours used per year :1,800 hr

Annual interest rate: 9%

Maintenance and repairs: 20% of purchase price

Diesel engine: 150 hp

Operating factor: 0.70

Fuel costs: $4.00/gal

Crankcase capacity: 6 gal

Hours between oil changes: 150 hr

Oil costs: $14/gal

:

Ownership Costs Method #2 Time-value-of-money equations Using the capital recovery factor to convert purchase price to annual costs, i (1 i)" Equivalent annual cost of purchase price Using the sinking fund factor to convert salvage value to annual costs, Equivalent annual cost of purchase price S (1 i)" 1 (1 i)" Ownership costs Pl (1 t i" -1 (1 i)" 1 J 15.6]