Use the following information to answer the question A farmer is contemplating the purchase of...
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A farmer is contemplating the purchase of a 600 HP 4WD tractor with a purchase price of $685,000 and a 33% retained value. The optimal years of use are 15. The annual hours of use are 450. Fuel use is 91 L/hr at a cost of $0.90/L. Repair rates are 2.5% of the purchase price per year. Insurance and housing is 1% of purchase price. The interest rate is 3.0%.
What are the Total Ownership Costs (fixed costs) per hour of use? Remember Ownership Costs include depreciation, interest on investment plus insurance and housing.
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