Question
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $52,000. The object is to save on horse transporter rentals.
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $52,000. The object is to save on horse transporter rentals.
Marsha had been renting a transporter every other week for $217 per day plus $1.85 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives the driver, Joe Laminitis, a $50 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.62 per mile. Insurance costs for Marshas transporter are $2,050 per year.
The transporter will probably be worth $32,000 (in real terms) after eight years, when Marshas horse Spike, will be ready to retire. Assume a nominal discount rate of 10% 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.
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