Motor grader with a diesel engine of 180 HP has an initial cost of 594,000. Its estimated useful life is 6 years and it is anticipated that it will be used an average of 2,000 hours per year. The crankcase of the engine has a capacity of 3.8 gallons and the site conditions necessitate oil changes every 120 hours. The unit price of diesel fuel and lubricating oil are $1.60 per gallon, and $27.00 per gallon respectively. Take the operating factor as 60%.

 1. Calculate the hourly cost of owning and operating this motor grader.

 a) Use the standard approach

 b) Use the PSSS approach. Assume maintenance and repair cost is 100% of depreciation. Take MARR = 8%. The tax rate of the company is 42% and the equipment is considered be in the 7-year MACRS class. No major repairs are anticipated. Your capital recovery factor for (A/P, 8%, 6 yrs) = 0.2163.

 c) Which approach is more conservative?

 

Sam has decided to travel the world for two years. He estimates that traveling expenses will be around $40,000 a year for each of the two years (paid at the end of the year, simplifying assumption). Since he has to quit his job he needs to have enough money saved to travel. His savings in the bank are $10,000. Sam plans to leave the country and start travel at the end of three years. Considering that he can earn interest on his savings of 3% per year, and in year one he can save only $10,000, how much money must he save on average per year in the last two years of work so he can start traveling? (10 points) Question 8 EcoVolis earned $80 million this year. The company's equity is $400 milion. Ecovolis retains 40 percent of its earnings. What is the company's earnings growth rate? What will next year's earnings be? (5 points)