1) A contractor has decided to add roller to his equipment fleet. He could purchase either a new or used one. Anticipated use of the roller for each year is 2000 hrs. Use interest rate as 10%. Which of the following alternative should the contractor select? Show calculations and Cash-Flow Diagrams for both options: a) The NEW roller’s capital cost is Rs (4.3 x your 5-digit ID)* and is expected to have a useful life of 16000 hrs of operation. Tire cost is Rs 3,50,000 to replace (estimated to occur after every 4000 hrs of use) and major repair will be needed after 8000 hrs of operation at a cost of Rs 4,20,000. Total of fuel, oil, field repair, labour cost and overhead charges are estimated as Rs 1100/hr. Estimated salvage value at the end of 16000 hrs of operation is Rs 7,00,000. b) The USED roller costs Rs (2.8 x your 5-digit ID) to purchase and is expected to have a useful life of 8000 hrs of operation. Tire cost is Rs 3,50,000 to replace (estimated to occur after every 4000 hrs of use). Total of fuel, oil, field repair, labour cost and overhead charges are estimated as Rs 1300/hr. Estimated salvage value at the end of 8000 hrs of operation is Rs 5,60,000.
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