It is decided that a farm is going to be cultivated by a tractor. Two competitive tractors are being considered for purchase.

The MARR is 10% per year and the diesel needed to fuel the tractor costs $0.2 per horse power.
a. At what level of operation (hours per year) would you be indifferent between the two tractors? If the cultivating system is expected to operate 2,500 hours in a year, which tractor should be recommended?
b. Perform a sensitivity analysis on the efficiency of tractor A. Over what range of cultivating efficiency is tractor A preferred to tractor B? Assume 250 hours of operation per year, and draw a graph to illustrate your answer.

Tractor A Tractor B Efficiency Cost of tractor MV Useful life Operating load on machine 20hp 5hp 0.8 $8,000 $10,000 1,000 $800 6 years 6 years 0.7