A small mining group is considering the purchase of a $1,786,713 continuous mining machine that will...

 

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A small mining group is considering the purchase of a $1,786,713 continuous mining machine that will operate approximately 6,000 hours per year. The operational costs for the unit are estimated to be about $192 per hour. The annual maintenance cost is estimated to be about 10% of the initial capital cost in year 1 and escalate by $52,032 each year thereafter. The expected life of the continuous miner is 7 years. The effective interest rate is 14%. What is the equivalent cost of the machine expressed as a single payment in year 0 (i.e "net present cost")? A small mining group is considering the purchase of a $1,786,713 continuous mining machine that will operate approximately 6,000 hours per year. The operational costs for the unit are estimated to be about $192 per hour. The annual maintenance cost is estimated to be about 10% of the initial capital cost in year 1 and escalate by $52,032 each year thereafter. The expected life of the continuous miner is 7 years. The effective interest rate is 14%. What is the equivalent cost of the machine expressed as a single payment in year 0 (i.e "net present cost")?

Answer rating: 100% (QA)

Consider the initial cost 1786713 Annual recurring costs Operating Cost 1152000year operating hou... View the full answer