Question

A clearing contractor purchases a dozer with a delivered price of $275,000. The company believes it can sell the used dozer after 4 years (2,000 hours per year) of service for $56,000. There will be no major overhauls. The company's cost of capital is 9.2%, and its tax rate is 33%. Property taxes, insurance, and storage will run at 4%. What is the time value method depreciation part of the ownership cost?

Name: a clearing contractor purchases a dozer with a delivered price of 275000 the company believes it can sell the used dozer after 4 yr 2000 hryr of service for 56000 there will be no major over 27362
Uploaded: 2022-05-20T17:16:55-08:00
Duration: 9 min 14 s
Channel: Manasvee Singh
Description: a clearing contractor purchases a dozer with a delivered price of 275000 the company believes it can sell the used dozer after 4 yr 2000 hryr of service for 56000 there will be no major over 27362

          A clearing contractor purchases a dozer with a delivered price of $275,000. The company believes it can sell the used dozer after 4 years (2,000 hours per year) of service for $56,000. There will be no major overhauls. The company's cost of capital is 9.2%, and its tax rate is 33%. Property taxes, insurance, and storage will run at 4%. What is the time value method depreciation part of the ownership cost?

Added by Encarnacion L.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Manasvee Singh

05/20/2022

Step 1

2% - Number of years (N) = 4 Using the formula: \[ AP = P \times \left( \frac{I}{1 - (1 + I)^{-N}} \right) \] Substitute the values: \[ AP = $219,000 \times \left( \frac{0.092}{1 - (1 + 0.092)^{-4}} \right) \] Calculate: \[ AP = $67,988.8 \] Show more…

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A clearing contractor purchases a dozer with a delivered price of $275,000. The company believes it can sell the used dozer after 4 years (2,000 hours per year) of service for $56,000. There will be no major overhauls. The company's cost of capital is 9.2%, and its tax rate is 33%. Property taxes, insurance, and storage will run at 4%. What is the time value method depreciation part of the ownership cost?