Net Present Value Method-Annuity E & T Excavation Company is planning an investm
ID: 2589242 • Letter: N
Question
Net Present Value Method-Annuity E & T Excavation Company is planning an investment of $186,100 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years Customers will be charged $145 per hour for buildorer work. The buldozer operator costs $32 per hour in wages and benefits. The buldozer is expected to require aneual maintenance cooting $10,000. The bulldozer uses fuel that is expected to cost $42 per hour of buildorer operation Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 17% 1S% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 .328 4.772 4.031 10 7.360 6.145 5.650 5019 4.192 a. Determine the equal annual net cash flows from operating the buldozer. Enter all amounts as positive numbers Cash inflows Hours of operation Revenue per hour Revenue per year Cash outflows Hours of operation Fuel cost per hour Labor cost per hour Total fuel and labor costs per hour Puel and labor costs per year Maintenance costs per yearExplanation / Answer
cost of bulldozer
186100
1-
cash inflows
hours of operations
1000
revenue per hour
145
total revenue
1000*145
145000
cash outflow
hours of operation
1000
fuel cost per hour
42
labor cost per year
32
total fuel and labor cost per hour
74
fule and labor cost per year
74000
maintenance cost per year
10000
annual net cash flow
61000
2-
present value of annual net cash inflow
annual net cash flow*PVAF at 20% for 5 years
61000*2.991
182451
less amount to be invested
186100
NPV
-3649
3-
fill in the blank -answer
1-
reject
2-
Greater
3-
given
cost of bulldozer
186100
1-
cash inflows
hours of operations
1000
revenue per hour
145
total revenue
1000*145
145000
cash outflow
hours of operation
1000
fuel cost per hour
42
labor cost per year
32
total fuel and labor cost per hour
74
fule and labor cost per year
74000
maintenance cost per year
10000
annual net cash flow
61000
2-
present value of annual net cash inflow
annual net cash flow*PVAF at 20% for 5 years
61000*2.991
182451
less amount to be invested
186100
NPV
-3649
3-
fill in the blank -answer
1-
reject
2-
Greater
3-
given
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