briggs excavation company is planning an investment of $531,400 for a bulldozer. the bulldozer is expected to operate for 2,000 hours per year for 10 years. customers will be charge $125 per hour for bulldozer work. the bulldozer operator costs $30 per hour in wages and benefits. the bulldozer is expected to require annual maintenance costing $20,000. the bulldozer uses fuel that is expected to cost $39 per hour of bulldozer operation

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.9430.9090.8930.8700.833 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 3.60s 3.353 2.991 6 4.917 4.355 4.11 3.7853.326 7 5.582 4.868 4.564 4160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the buldozer. Use a minus sign to indicate cash outfows. Briggs Excavation Company Equal Annual Net Cash Flows Cash inflows Hours of operation 2,000 Revenue per hour 125 Revenue per year y 250,000 Cash outflows Hours of operation 2,000 Fuel cost per hour 4.9174.355 4.111 3.7853.326 5.582 4.868 4.564 4.1603.605 8 6.210 5.335 4.968 4.4873.837 9 6.802 5.7595.3284.7724.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the buldozer. Use a minus sign to indicate cash outflows. Briggs Excavation Company Equal Annual Net Cash Flows Cash inflows: Hours of operation 2.000 2,000 Revenue per hour 125 Revenue per year 250,000v Cash outflows: Hours of operation 2,000 V Fuel cost per hour 39 Labor cost per hour 30 Total fuel and labor costs per hour Fuel and labor costs per year 138,000 20,000v Maintenance costs per year 92,000 Annual net cash flows Foedback T Check My Work a. Subtract the operating expenses (hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs) fr Learning Objective 3. b. Determine the ne t present value of the investment, assuming that the desired rate of return is 10%. Use the present value of an annuity of indicate a negative net present value. Present value of annual net cash flows Amount to be invested Net present value c. Should Briggs Excavation invest in the bulldozer, based on this analysis? Yes because the bulldozer cost is less than the present value of the cash flows at the minimum desired rate of return of 10%. d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculat hours Feedback Check My Work b. Multiply the annual net cash flow by the present value of an annuity factor and subtract the amount to be invested c. Which is more favorable? d. Set up an equation to solve for hours. Learning Objective 3