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You just borrowed $1,200,000 from the bank at 1% per month to purchase a new Cater- pillar 8750 dragline excavator (see Figure 2). You expect
You just borrowed $1,200,000 from the bank at 1% per month to purchase a new Cater- pillar 8750 dragline excavator (see Figure 2). You expect to keep the dragline for 120 months. Based on past experience in your company, you estimate following operating and mainte- nance costs. Operator's salary, maintenance, lube, and filters: $20,000 / month Expected gradient in these O&M costs: $250 / month / month Replace cables and reline bucket once a year: $50,000 / year Overhaul engine and tracks every 30 months: $150,000 / each overhaul At the end of the 120 month period the dragline should sell for about $300,000 in "as is" condition, without a final overhaul and without replacing the used cables, etc. You estimate that the dragline will move 100,000 [m] the first month. Due to continued wear, age, and down time, the amount moved will decrease by 1,000 (m) per month each month thereafter until a 30-month overhaul. Immediately following an overhaul the produc- tion will be back up to 100,000 [m3] the first month and decreasing each month thereafter. This cycle is repeated with each 30-month overhaul. (a) How much should the contractor charge in dollars per [m] to recover all of his dragline costs plus $1.00 per (m") for overhead and profit? Ignore taxes and inflation. (b) Plot the required per meter cubed cost (as defined in part (a)) versus the interest rate charge by the bank for 0.5%
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