Use Method 2 (time-value-of-money equations for ownership costs) to determine the probable cost per hour of owning and operating a rubber tire unit of equipment with a 250-hp diesel engine. The following conditions apply.

Factory delivered price = $450,000 Sales tax = 5% of delivered price Unloading and assembling = $2,500 Salvage value = $120,000

Useful life = 5 yr

Hours used per year = 1,500 hr Interest on investment = 8%

Maintenance and repairs = 20% of net purchase; Diesel engine = 250 hp

Operating factor = 0.60; Fuel costs = $4.00/gal Crankcase capacity = 8 gal

Hours between oil changes = 120 hr; Oil costs = $16/gal

Tires =$55,000; Tire life = 3,500 Hr; Tire Repairs 10% depreciation