Briggs Excavation Company is planning an investment of $698,600 for a bulldozer The bulldozer is expected to operate for 2,000 hours per year for 10 years Customers will be charged $130 per hour for bulldozer work The bulldozer operator costs $27 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 $35 per hour of bulldozer operation Present Value of an Annuity of $1 at Compound Interest Year 6 10 12 15 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 3 352 2 991 6 4 917 4 355 4 111 3 784 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 5 328 4 772 4 031 10 7 360 6 145 5 650 5 019 4 192 Question Content Area a Determine the equal annual net cash flows from operating the bulldozer Use a minus sign to indicate cash outflows Briggs Excavation Equal Annual Net Cash Flow Cash inflows Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per hour Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per year Cash outflows Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour Annual net cash flow Fuel cost per hour Revenue per year Revenue per hour Annual net cash flow Labor cost per hour Revenue per year Revenue per hour Annual net cash flow Total fuel and labor costs per hour Revenue per year Revenue per hour Annual net cash flow Fuel and labor costs per year Revenue per year Revenue per hour Annual net cash flow Maintenance costs per year Revenue per year Revenue per hour Annual net cash flow Hours of operation Revenue per year Revenue per hour b Determine the net present value of the investment, assuming that the desired rate of return is 10 Use the present value of an annuity of $1 table above Round to the nearest dollar If required, use the minus sign to 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 No , because the bulldozer cost is less than more 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 calculations and final answer to the nearest whole number

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Briggs Excavation Company is planning an investment of $698,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 10

Briggs Excavation Company is planning an investment of $698,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 10 years. Customers will be charged $130 per hour for bulldozer work. The bulldozer operator costs $27 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 $35 per hour of bulldozer operation.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	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	3.352	2.991
6	4.917	4.355	4.111	3.784	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	5.328	4.772	4.031
10	7.360	6.145	5.650	5.019	4.192

Question Content Area

a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.

Briggs Excavation Equal Annual Net Cash Flow
Cash inflows:
Fuel and labor costs per year/Hours of operation/Maintenance costs per year/Total fuel and labor costs per hour
Fuel and labor costs per year/Fuel cost per hour/Labor cost per hour/Revenue per hour
Fuel and labor costs per year/Fuel cost per hour/Labor cost per hour/Revenue per year
Cash outflows:
Fuel and labor costs per year/Hours of operation/Maintenance costs per year/Total fuel and labor costs per hour
Annual net cash flow/Fuel cost per hour/Revenue per year/Revenue per hour
Annual net cash flow/Labor cost per hour/Revenue per year/Revenue per hour
Annual net cash flow/Total fuel and labor costs per hour/Revenue per year/Revenue per hour
Annual net cash flow/Fuel and labor costs per year/Revenue per year/Revenue per hour
Annual net cash flow/Maintenance costs per year/Revenue per year/Revenue per hour
Annual net cash flow/Hours of operation/Revenue per year/Revenue per hour

b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to 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/No

, because the bulldozer cost is

less than/more 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 calculations and final answer to the nearest whole number.