Since we don’t really have any idea what days of the year the earthmovers will be used, simply approximate the costs over a year, and run a yearly analysis. This is called the “end of year” or “end of period” conventions. For example, call N the number of days you will be using the machine per year. Then multiply the cost per day times the number of days used per year (N) as the cost per year, and assume that amount is paid at the end of each year. Daily profit can also be approximated as daily profit *N = profit per year, and assume you receive it at the end of each year.

Posted on by Abigail Stason