Need help with the following, appreciate if you show your calculations. Thank yo

Question

Need help with the following, appreciate if you show your calculations. Thank you!

Net Present Value Method-Annuity Briggs Excavation Company is planning an investment of $132,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five ears. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $28 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $8,000. The bulldozer uses fuel that is expected to cost $46 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 12% 0.893 1.690 2.402 3.037 3.605 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 2090 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 Year 1 2 3 4 6 7 8 4.564 4.968 5.328 5.650 10

Explanation / Answer

Present value of cash flow = Initial investment = $ 132,000

Let Number of hours be"X"

Present value of cash flow = PVAF@10%,5 [number of hours (Price -cost per hour )] - Maintenance cost

    132,000 = 3.791 [X(110 - 28 -46 ) - 8000]

     132,000 / 3.791 =   [X *36 ] - 8000

      34819.31 = 36X - 8000

       36X = 34819.31 +8000

     X = 42819.31 /36

            = 1190 approx

Number of hours at break even = 1190 hours

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.