Jones Excavation Company is planning an investment of $$442,000$ for a bulldozer. The bulldozer is expected to operate for $2,000$ hours per year for six years. Customers will be charged $$145$ per hour for bulldozer work. The bulldozer operator costs $$34$ per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $$20,000.$ The bulldozer uses fuel that is expected to cost $$45$ per hour of bulldozer operation.

Present Value of an Annuity of $$1$ at Compound Interest

Year $6\%10\%12\%15\%20\%$

$10\mathrm{.}9430\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}833$

$21\mathrm{.}8331\mathrm{.}7361\mathrm{.}6901\mathrm{.}6261\mathrm{.}528$

$32\mathrm{.}6732\mathrm{.}4872\mathrm{.}4022\mathrm{.}2832\mathrm{.}106$

$43\mathrm{.}4653\mathrm{.}1703\mathrm{.}0372\mathrm{.}8552\mathrm{.}589$

$54\mathrm{.}2123\mathrm{.}7913\mathrm{.}6053\mathrm{.}3532\mathrm{.}991$

$64\mathrm{.}9174\mathrm{.}3554\mathrm{.}1113\mathrm{.}7853\mathrm{.}326$

$75\mathrm{.}5824\mathrm{.}8684\mathrm{.}5644\mathrm{.}1603\mathrm{.}605$

$86\mathrm{.}2105\mathrm{.}3354\mathrm{.}9684\mathrm{.}4873\mathrm{.}837$

$96\mathrm{.}8025\mathrm{.}7595\mathrm{.}3284\mathrm{.}7724\mathrm{.}031$

$107\mathrm{.}3606\mathrm{.}1455\mathrm{.}6505\mathrm{.}0194\mathrm{.}192$

Question Content Area

a$.$ Determine the equal annual net cash flows from operating the bulldozer.

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Jones Excavation Company

Equal Annual Net Cash Flows

Cash inflows:

$-$ Select $-$

$\backslash$times $$-$ Select $-$

$$-$ Select $-$

Cash outflows:

$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$\backslash$times $$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

Question Content Area

b$.$ Determine the net present value of the investment, assuming that the desired rate of return is $12\%.$ 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 $fill in the blank $5$fd$4$c$709$afc$1$fa$2\_1$

Amount to be invested fill in the blank $5$fd$4$c$709$afc$1$fa$2\_2$

Net present value $fill in the blank $5$fd$4$c$709$afc$1$fa$2\_3$

c$.$ Should Jones invest in the bulldozer, based on this analysis?

$,$ because the bulldozer cost is

the present value of the cash flows at the minimum desired rate of return of $12\%.$

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.

fill in the blank $5$fd$4$c$709$afc$1$fa$2\_6$

hours