The annual expenses for taxes (A3), insurance (A4) and storage (A5) are calculated by multiplying average annual investment (AAI) by the respective annual rates (%).
Then the hourly ownership cost for the construction equipment is calculated as follows;
Hourly tire cost (by not considering time value of money)
The hourly tire cost is equal to the sum of hourly tire use (replacement) cost and hourly tire repair cost. The hourly tire use cost is obtained by dividing the cost of a set of tires by the life of tires in hours. The hourly tire repair cost is equal to 15% of the hourly depreciation (straight-line) cost of tires. The total depreciation cost of a set of tires over its estimated life is equal to its initial cost as its salvage value is assumed as zero . As mentioned in the question, a new set of tires will be replaced at the end of every 4 years of operation and the equipment will operate 1800 hours per year. Thus the life of a set of tires is equal to 7200 hours (1800 x 4).
Hourly tire cost = hourly tire use cost + hourly tire repair cost
Thus for the construction equipment, the hourly ownership cost is Rs.667.2/h and the hourly tire cost (by not considering time value of money) is Rs.95.8/h.
Similar to the calculation of hourly cost of equipment as mentioned in above examples, other components of equipment operating cost can also be calculated by using already mentioned guidelines and equations.