Question
A contractor has purchased a grader for $150,000 and expects to use it about 1,000 hours per year. The contractor plans to use the grader
A contractor has purchased a grader for $150,000 and expects to use it about 1,000 hours per year. The contractor plans to use the grader for 12 years and then realize a salvage value of about $27,000. Tires for the grader cost $7,200 for a set of six tires. The useful life of a set of tires is estimated at 3,500 hours. The grader is powered by a 135-horsepower diesel engine, and diesel fuel costs $1.05 per gallon. a) What is the hourly ownership cost for the grader (less tires) at a minimum attractive rate of return of 9%? (Tip: Time value of money analysis, be careful with tire cost) b) The equipment repair factor for the grader is estimated to be about 50% of the hourly straight-line depreciation for the 12 years of ownership. What do you estimate the hourly maintenance and repair cost to be for the grader? (Tip: Repaid Factor is given as 50% so do not need to read it from table, be careful with tire cost when you calculate HDR for equipment less tires) c) What do you estimate the hourly tire cost to be for the grader? (Tip: need to consider two parts: hourly tire cost and hourly tire repair cost; total tire useful life hours given in the problem, no need to read from table) d) What do you estimate the hourly fuel cost to be for the grader under unfavorable working conditions? (Tip: Fuel factor read from table) e) What do you estimate the hourly filter, oil, and grease cost to be for the grader under unfavorable working conditions? (Tip: Service factor read from table) f) What hourly equipment rate should the contractor charge a project for use of the grader if a profit of 2% is desired from the equipment fleet and operator costs for the grader are $28.00 per hour? (Tip: 2% profit added to the total hourly equipment ownership and operation cost)
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