2.2.3. Tire Cost

Try these first

1. 1.

   What are the two main components of equipment costs discussed in this section?

   Hint

   Think of what costs are incurred directly from owning equipment.

2. 2.

   How is depreciation for tires calculated?

   Hint

   Consider the formula provided in the lesson.

3. 3.

   What is the primary method to estimate ownership cost?

   • Average Annual Method
   • Time Value Method
   • Straight-Line Method

   Hint

   Focus on the terminology used in the lesson.

4. 4.

   Is the Peurifoy Method concerned with cash flow timing?

   • True
   • False

   Hint

   Reflect on the key elements of the method you learned.

5. 5.

   A construction company is budgeting for an excavator with an initial tire cost of $10,000 and a salvage value of$2,000 over a life span of 6,000 hours. Calculate the tire depreciation cost per hour. Additionally, if market prices increase the replacement cost to $12,000, how would it impact the operational cost?

   Hint

   Follow the depreciation formula and assess how changes in costs will impact your hourly projections.

6. 6.

   Analyze a scenario where you have to compare two different tire models for an excavator; one costs $9,000 with a lifespan of 4,000 hours and the other costs$12,000 with a lifespan of 5,000 hours. Which one would be more cost-effective and why?

   Hint

   Evaluate the cost per hour to determine which tire model is financially smarter over its productive life.