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 $ 4 6 , 0 0 0 . The object

Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $46,000. The object is to save on horse transporter rentals.
Marsha had been renting a transporter every other week for $211 per day plus $1.55 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives the driver, Joe Laminitis, a $45 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.56 per mile. Insurance costs for Marshas transporter are $1,750 per year.
The transporter will probably be worth $26,000(in real terms) after eight years, when Marshas horse Spike, will be ready to retire. Assume a nominal discount rate of 7% and a 2% 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.
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.

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

Students also viewed these Finance questions