Question
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $54,000. The object is to save on horse transporter rentals.
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $54,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $219 per day plus $1.95 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $30 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.64 per mile. Insurance costs for Marshas transporter are $2,150 per year. The transporter will probably be worth $34,000 (in real terms) after eight years, when Marshas horse Spike will be ready to retire. Assume a nominal discount rate of 7% and a 4% forecasted inflation rate. Marshas transporter is a personal outlay, not a business or financial investment, so taxes can be ignored.
Calculate the NPV of the investment
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