Net Present Value MethodAnnuity

Briggs Excavation Company is planning an investment of $132,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $28 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $8,000. The bulldozer uses fuel that is expected to cost $46 per hour of bulldozer operation.

QUESTION:

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.)

d. Set up an equation to solve for hours. Multiply the annuity factor used in (b).

3.791[( Hrs. x $110) ( Hrs. x $74) - $8,000] = $132,000.

What are the total hours?