Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

. Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $35,000. The object is to save on horse transporter

. Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $35,000. The object is to save on horse transporter rentals. Marsh had been renting a transporter every other week for $200 per day plus $1.00 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives her driver, Joe Laminitis, a $40 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.45 per mile. Insurance costs for Marshas transporter are $1,200 per year. The transporter will probably be worth $15,000 (in real terms) after eight years, when Marshas horse Spike, will be ready to retire. Is the transporter a positive-NPV investment? Assume a nominal discount rate of 9% and a 3% forecasted inflation rate. Marshas transporter is a personal outlay, and not a business or financial investment, so taxes can be ignored.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Pricing And Liquidity Of Complex And Structured Derivatives

Authors: Mathias Schmidt

1st Edition

3319459694, 978-3319459691

More Books

Students also viewed these Finance questions

Question

9.4 Explain the roles in career development.

Answered: 1 week ago

Question

8.6 Discusstwo techniques used for assessing training needs.

Answered: 1 week ago