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A construction company has purchased a crane. The Table Q4 below summarises the relevant financial and operational information of the equipment Table 04 Initial cost

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A construction company has purchased a crane. The Table Q4 below summarises the relevant financial and operational information of the equipment Table 04 Initial cost $160 000 Years of life of the plant Average working hours per year 2 500 Resale value/ salvage value $85 000 Insurance premium per year $350 Licenses and tax per year $250 Fuel consumption per hour @ $0.31 per litre 12 litres Oil and grease, % of fuel 10% Repair and maintenance, % of initial cost/year 15% Required rate of return on capital 10% a) Compare the value of depreciation and year-end book value of the crane for each of the four years, using: (i) straight line method, and (ii) sum-of-year's digit method. [10] b) Calculate the ownership cost, operating cost, and determine the appropriate cost per year for buying the crane use a straight line depreciation: 0 0

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