Determine ownership depreciation cost per hour for a D9N Caterpillar dozer with the following assumptions: - Engine - 370hp - Overall cost of Money 6% (i) - Useful life - 5 years (n) - Hours used per year 2200 - Initial Cost - \$400,000 (P) - Cost of tires - $42,000 (for this formula you need to subtract the cost of the tires from the initial cost) - Estimated Salvage Value - \$40,000 (F) or [(S) for AAI formula] NOTE: Use the average of the Time Value Method and the Average Annual Investment (AAI) Method to determine the answer. ANSWER: $/HR STEP 1 - Time Value Method Formulas: (USCRF) Ap=P[(1+i)n1i(1+i)n] (USSFF) Af=F[(1+i)n1i] Ownership Depreciation =2200hr/yrApAf= $/HR STEP 2 - Average Annual Investment Method Ownership Depreciation = Straight-Line Depreciation + Cost of Money - Cost of Money is a function of the Average Annual Investment (AAI). AAI: AAI=2nP(n+1)+S(n1)AAl=$/YR Cost of Money =2200AAIx(i)=$ /HR - Straight-Line Depreciation: Initial Cost Cost of Tires Salvage Value =$ SL Depreciation per Year =$ / YR SL Depreciation per Hour =$/HR - Ownership Depreciation = Cost of Money +SL Depreciation =$/HR STEP 3 - Calculate the Average of the Two Methods TimeValueMethodAAlMethodAverageCost/HR=$Cost/HR=$Cost/HR=$/HR/HR/HR Determine ownership depreciation cost per hour for a D9N Caterpillar dozer with the following assumptions: - Engine - 370hp - Overall cost of Money 6% (i) - Useful life - 5 years (n) - Hours used per year 2200 - Initial Cost - \$400,000 (P) - Cost of tires - $42,000 (for this formula you need to subtract the cost of the tires from the initial cost) - Estimated Salvage Value - \$40,000 (F) or [(S) for AAI formula] NOTE: Use the average of the Time Value Method and the Average Annual Investment (AAI) Method to determine the answer. ANSWER: $/HR STEP 1 - Time Value Method Formulas: (USCRF) Ap=P[(1+i)n1i(1+i)n] (USSFF) Af=F[(1+i)n1i] Ownership Depreciation =2200hr/yrApAf= $/HR STEP 2 - Average Annual Investment Method Ownership Depreciation = Straight-Line Depreciation + Cost of Money - Cost of Money is a function of the Average Annual Investment (AAI). AAI: AAI=2nP(n+1)+S(n1)AAl=$/YR Cost of Money =2200AAIx(i)=$ /HR - Straight-Line Depreciation: Initial Cost Cost of Tires Salvage Value =$ SL Depreciation per Year =$ / YR SL Depreciation per Hour =$/HR - Ownership Depreciation = Cost of Money +SL Depreciation =$/HR STEP 3 - Calculate the Average of the Two Methods TimeValueMethodAAlMethodAverageCost/HR=$Cost/HR=$Cost/HR=$/HR/HR/HR