Q2) A contractor purchase an equipment with a delivered price of (750000S) to operate it in one of his projects. He estimate the cost of this equipment according to the following justification (40 marks) - Total interest rate (including bank interest, storage, insurance, ...) =15% Consumption of (oil, fuel, and grease) =(8.25 S/hr) - Cost of maintenance and repair = 60% of the annual straight line depreciation - Useful life (10 years) with (1400 hours used per year) - Salvage value = 150000 a- Determine the probable cost per hour according to the previous justification. b- After (7 years) of operating the equipment, the contractor recorded all the costs of the equipment as shown in the table blow. He notice the increment in the average consumption and maintenance in the last two years (the 6, and 7 years). Calculate the average cost per hour of the equipment for the first five years, according to the salvage value of the equipment at the end of the 5th year (200000$). oil Year Maintenance Fuel oil Grease and repair consumption consumption consumption S/hr liter/hr liter/hr kg/hr 1 20 4 0.2 0.05 2 22 4.25 0.22 0.07 3 25 4.75 0.35 0.1 4 28 5.1 0.4 0.12 5 32 5.2 0.41 0.18 6 41 8 1.5 0.3 7 48 8.5 2.25 0.35 Unit price 0.5 S/liter 10$/liter 4$/kg c. After the Deterioration of the equipment at the 6", and 7" years it had been estimate the salvage value of the equipment at the end of the 7th year (92000 S). Calculate the average cost per hour of the equipment during the seven years. d. It was clear by checking the equipment at the end of the 7th year, the equipment needs a major repair which will cost (90000S), but it will return the performance of the equipment like the average performance at the first five years In terms of consumption of fuel, oil, and grease for the next four years (8, 9, 10, 11 year), and the salvage value of the equipment at the end of these four years = (50000S). Do you agree to do this major repair, or you prefer sell the equipment now (at the end of the 7th year). Support your answer with calculation. Suppose all the prices and interest are constant