A contractor has purchased a new small backhoe for $120,000 (Note: the backhoe came with a new set of tires included in the price) that he plans to use in excavating ditches for utilities construction.He plans to use the backhoe for 6 years and sell the used machine for $40,000 with a new set of tires.He must replace the tires on the backhoe after each 3,000 hours of use at a cost of $15,000.Annual operating and labor costs are estimated to be $20,000 per year.The contractor estimates that the backhoe will be used about 1,000 hours per year.Show your calculations in the next page for partial credit on the questions below.

(a)[3] If the minimum attractive rate of return is 12%; what is the annual ownership cost for the backhoe (less tires)?

Annual ownership cost (less tires) =___________________________________

(b)[3] If the minimum attractive rate of return is 12%; what is the annual ownership cost for the backhoe plus the annual operating cost for the tires?

Annual ownership cost (with tires) =___________________________________

(c)[3] If the minimum attractive rate of return is 12%; what is the hourly ownership and operating cost for the backhoe?

Hourly ownership and operating cost = ___________________________________