Osborne Excavation Company is planning an investment of $315,000 for a bulldozer. The bulldozer is expected to
Question:
Osborne Excavation Company is planning an investment of $315,000 for a bulldozer. The bulldozer is expected to operate for 1,850 hours per year for five years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $37 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $9,750. The bulldozer uses fuel that is expected to cost $48 per hour of bulldozer operation.
a. Determine the equal annual net cash flows from operating the bulldozer.
b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present values of an annuity of $1 in the chapter. Round to the nearest dollar.
c. Should Osborne Excavation invest in the bulldozer, based on this analysis?
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
Step by Step Answer:
a Cash inflows Hours of operation 1850 Revenue per hour 140 Revenue per year 259...View the full answer
