An irrigation canal contractor wants to determine whether he should purchase a usedCaterpillar mini excavator or a Toro powered rotary tiller for servicing irrigation ditches in an agriculturalarea of California. The initial cost of the mini excavator is $33,500 with a $7,000 salvage value after 8years. Fixed costs for insurance, license, etc. are expected to be $13,700 per year.
The excavator willrequire one operator at $15 per hour and maintenance at $1.25 per hour. In 1 hour, 0.15 mile of ditchcan be prepared. Alternatively, the contractor can purchase a tiller and hire 2 workers at $11 per houreach.
The tiller costs $2,400 and has a useful life of 4 years with no salvage value. Its operating cost isexpected to be $1.49 per hour, and with the tiller, the two workers can prepare 0.04 mile of ditch in 1hour. The contractor's MARR is 12% per year. Determine the number of miles of ditch per year the contractor would have to service for the twooptions to break even.
A large heat treating oven for powder-coating automobile frames was purchased for $50,000. The estimated operating costs, maintenance costs, and salvage values are shown below.
Determine the AW (annual worth) that corresponds to the economic service life of the equipment, using a rate of 8%
Operating Maintenance Salvage Value, Year Cost, cost, 35,000 3,000 15,000 3,000 30,000 17,000 25,000 19,000 5,000 20,000 21,000 5,000 15,000 6,500 23,000