Question
A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The cost of one set of tires
A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The flywheel horsepower rating of the loaders diesel engine is 105 horsepower. The interest rate is 10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel costs $1.20 per gallon.
Please calculate the hourly tire depreciation cost of the second set of tires considering the time value of money, assuming that the loader has a service life of 10 years and operates 2,000 hours per year, and a set of tires can be expected to last 4,000 hours.
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