Question 1 (5 points)
Saved
You are looking at Tractor X to facilitate your farm doing a better job with manure handling. This way you can get the manure in the ground with less loss and less irritation to the neighbors. That rig lists for $475,200. The dealer will allow $38,575 for your old tractor that would sell at auction for $32,000. You plan to keep the machine 9 years, at which point it will be worth $68,000. You can borrow the money for 4.7% annual interest, and expect 1.9% inflation.
For parameters like repair cost, insurance cost and storage cost, use the slides provided as reference. Tractor X will take up 825 square feet of storage space. Assume 4,970 hours of use. Use 1% of list price for a tax estimate.
For example, Real interest rate: 4.7%-1.9%=2.8% or 0.028
Amortization factor= =0.12723882 should be rounded to = 0.1272
What is the total Depreciation and Interest? Use the capital recovery method.
Question 1 options:
$52,863.50
$1,904.00
$9,056.42
$400,625.00