Engineering economics

A contractor has decided to add a grader to his equipment fleet. He could purchase either a new or a used one. Interest, insurance, and taxes total about 12%, and the contractor anticipates using the grader about 2,000 hours per year. which of the following alternatives should the contractor select? a) The new grader costs 120,000 to purchase and is expected to have a useful life of 16,000 hours of operation. Tires cost %5,000 to replace (estimated to occur after every $4,000 hours of use) and major repairs will be needed after 8,000 hours of operation at a cost of $6,000. Fuel, oil, and minor maintenance cost about $15.25 for each hour the grader is used. Estimated salvage value at the end of 16,000 hours of operation is $10,000. b) The used grader costs $75,000 to purchase and is expected to have a useful life of 8,000 hours of operation. Tires cost $5,000 to replace (estimated to occur after every $4,000 hours of use). Fuel, oil, and minor maintenance cost about $18.25 for each hour the grader is used. Estimated salvage value at the end of 8,000 hours of use is $8,000