Please write out work and formulas (not just excel sheets) 1. Mowers (15 points)

Question

Please write out work and formulas (not just excel sheets)

1. Mowers (15 points) Ryan, an eighth-grade student, would like to start a lawn mowing business that he would pursue over the next five years. After the fifth year he plans to attend college and will no longer have time to mow yards. Ryan is considering two mowers. The first is a Husqvarna riding mower that costs $2500 and would last five years, at which time it would have a salvage value of $500. The second is a Honda gas-powered push mower that costs $300 and lasts two years and has no salvage value. Ryan believes that the Husqvarna would require $5 in operating costs (gas and maintenance) per lawn, whereas the Honda would require $4 in operating costs. All of the dollar values given above are in nominal terms. Ryan's nominal MARR is 10%/year. What is the capital ownership cost (or the capital recovery cost) for each mower? (/ poiniz) a. b. If Ryan could mow 300 lawns per year with the Husqvarna and 150 lawns per year with the Honda, how much would he need to charge per lawn with each mower to just breakeven (not counting his labor)? (8 points)

Explanation / Answer

A. Capital recovery cost or ownership cost for Husqvarna = 2500-500=2000$.

For Honda= 300$

B. For Husqvarna breakeven price = 5$ at that price Ryan will be able to cover the operating costs, profit will be 0.

For Honda breakeven price = 4$.

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