Net Present Value Method$-$AnnuityBriggs Excavation Company is planning an investment of $$465,200$ for a bulldozer. The bulldozer is expected to operate for $2,000$ hours per year for five years. Customers will be charged $$145$ per hour for bulldozer work. The bulldozer operator costs $$33$ per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $$20,000.$ The bulldozer uses fuel that is expected to cost $$43$ per hour of bulldozer operation.Present Value of an Annuity of $$1$ at Compound InterestYear$6\%10\%12\%15\%20\%10\mathrm{.}9430\mathrm{.}9090\mathrm{.}8930\mathrm{.}8700\mathrm{.}83321\mathrm{.}8331\mathrm{.}7361\mathrm{.}6901\mathrm{.}6261\mathrm{.}52832\mathrm{.}6732\mathrm{.}4872\mathrm{.}4022\mathrm{.}2832\mathrm{.}10643\mathrm{.}4653\mathrm{.}1703\mathrm{.}0372\mathrm{.}8552\mathrm{.}58954\mathrm{.}2123\mathrm{.}7913\mathrm{.}6053\mathrm{.}3532\mathrm{.}99164\mathrm{.}9174\mathrm{.}3554\mathrm{.}1113\mathrm{.}7853\mathrm{.}32675\mathrm{.}5824\mathrm{.}8684\mathrm{.}5644\mathrm{.}1603\mathrm{.}60586\mathrm{.}2105\mathrm{.}3354\mathrm{.}9684,4873\mathrm{.}83796\mathrm{.}8025\mathrm{.}7595\mathrm{.}3284\mathrm{.}7724\mathrm{.}0317\mathrm{.}3606\mathrm{.}1455\mathrm{.}6505\mathrm{.}0194\mathrm{.}19210$a$.$ Deter

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a$.$ Subtract the operating expenses $($hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs$)$ from the revenues $($operating hours multiplied by the hourly revenue$).$

Learning Objective $3.$

b$.$ Determine the net present value of the investment, assuming that the desired rate of return is $10\%.$ Use the present value of an annuity of $$1$ table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.

Present value of annual net cash flows

Amount to be invested

Net present value

c$.$ Should Briggs Excavation invest in the bulldozer, based on this analysis?

$,$ because the bulldozer cost is $$ the present value of the cash flows at the minimum desired rate of return of $10\%.$

d$.$ Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculations and final answer to the nearest whole number.

$118,000$

hoursmine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.