Question

Your company buys a piece of equipment for $65,000. You expect to use this equipment for seven years of approx 15,000 hours of service life before selling it for its scrap value, which you assume to be 2% of the initial cost. To finance the purchase, your company took out a loan at a rate of 4% annually that is paid over five years. The cost of insurance, taxes, and storage is estimated to be 8% per year while yo own this equipment.

Start fo year book value for the 6th year (use the straight line method)

What is the total depreciation per lifetime working hour?

Make a 7 column 4 row table with the rows labeled start of year book value, annual depreciation expense, accumulated depreciation, end of year book value and the columns labeled by the years- 1, 2, 3, 4, 5, 6, 7 =7 columns

Find the interest cost per working hour, the insurance, tax and storage cost per working hour, and the total ownership costs per working hour.

Answer 1