A scraper will be purchased for a cost of $420,760. After a useful life of 5...

A scraper will be purchased for a cost of $420,760. After a useful life of 5 years, it will be sold for $40,000. Assume interest of 15% for borrowing money, 4% for risk, and 3% as the equivalent interest rate for taxes, insurance, and storage. What is the annual ownership cost ? Approximately how many hours per year must the scraper be used to be able to charge it out at an hourly cost of $44.30 ?

Expert Solution

Calculation for Annual Ownership cost of Scrapper ( in $)
Annual Depreciation		76152
( 420760-40000)/5

Interest cost		92,567
Interst on Borrowing Money	15%
Interest for risk	4%
Interest for Tax , Insurance storage	3%
Total Interets	22%

Total Annual Cost		168,719


Calculation for No.. Of Hour to be used in a year
Total Annual Ownership cost		$ 168,719.20

Hourly Cost charge/Hour		$ 44.30

No. of Hours to be used in year		3808.55 Hours in a Year
(168719.20/44.30)

jeff jeffy answered 2 years ago

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