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Happy Harvesters, Inc. owns a large combine. They know how much their costs are for fuel, repairs and labor, but they need help calculating their
Happy Harvesters, Inc. owns a large combine. They know how much their costs are for fuel, repairs and labor, but they need help calculating their current ownership costs, so they can tell if the custom rates they charge for combining are high enough. Here are their facts: (.80 x 7.5 %) + (.20 x 5%) = 6.0 % + 1.0 % = 7.0% Insurance and taxes: 0.3% of current value What would be their average ownership costs per year over the 5 years they expect to own the combine? (first find the average value of the combine over the 5 years) Depreciation: (120,000 - 60.000)/5 = $12.000 (120,000 + 60.000)/2 = $90.000 (90.000 times 0.5%) = $430 (90.000 times 7%) = $6, 300 (12.000 + 6.300 + 430) = $18, 750
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