Question $1$

A caterpillar D$7220-$dozer Cost $$120,000$ to purchase. Fuel and minor maintenance are estimated to cost $$25$ per operating hour. A set of tires cost $$8500$ to replace, and their estimated life is $4000$ use hours. A $$30,000$ major repair will probably be required after $6000$ hr of use. The machine is expected to last for $12000$ hr$,$ after which it will be sold at a price $($salvage value$)$ equal to $10\%$ of the original purchase price. A final set of new tires will not be purchased before the sale.

How much should the owner of the machine charge per hour of use, if it is expected that the machine will operate $2000$ hr per year $($ignore all cost not mentioned in the question$)?$ The company$$s cost of capital rate is $15\%.$ Calculate that cost per hour assuming two options:

A$.$ The machine can be purchased now in full.

B$.$ The machine will be purchased on $2$ equal installments one now and the other in $3$ years.