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 $39,000. The object is to save on horse transporter rentals.

image text in transcribed

Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $39,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $204 per week plus $1.20 per mile. Most of the trips are 90 miles in total. Marsha usually gives the driver a $30 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $.49 per mile. Insurance costs for Marsha's transporter are $1,400 per year. The transporter will probably be worth $19,000 (in real terms) after eight years, when Marsha's horse Nike will be ready to retire. Assume a nominal discount rate of 9% and a forecasted inflation rate of 4%. Marsha's transporter is a personal outlay, not a business or financial investment, so taxes can be ignored. Hint: All numbers given in the questions are in real terms. Assume CF at end of year, for simplicity. Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) NPV $ 65833 X

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

AI In The Financial Markets

Authors: Federico Cecconi

1st Edition

3031265173, 978-3031265174

More Books

Students also viewed these Finance questions