Question
An equipment cost is $50,000 to purchase. Fuel and minor maintenance are estimated to cost $15 per operating hour. A set of tires cost $4,000
An equipment cost is $50,000 to purchase. Fuel and minor maintenance are estimated to cost $15 per operating hour. A set of tires cost $4,000 to replace. Their estimated life is 3,000 hours. A $5,000 major repair will be required after 6,000 hours. The equipment is expected to last for 10,000 hours. It is Salvage value is 10% of its original price. A final set of new tires will not be purchased before the sale. How much should the owner of the equipment charge per hour of use, if it is expected that the equipment will operate 2,000 hours per year? The company`s cost of capital rate is 8%
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