Osborne Excavation Company is planning an investment of $362,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $115 per hour for bulldozer work. The bulldozer operator costs $26 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 $34 per hour of bulldozer operation.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.353	2.991
6	4.917	4.355	4.111	3.785	3.326
7	5.582	4.868	4.564	4.160	3.605
8	6.210	5.335	4.968	4.487	3.837
9	6.802	5.759	5.328	4.772	4.031
10	7.360	6.145	5.650	5.019	4.192

a. Determine the equal annual net cash flows from operating the bulldozer. Enter all amounts as positive numbers.

Annual cash inflows:
Hours of operation			fill in the blank 1
Revenue per hour			$fill in the blank 2
Revenue per year				$fill in the blank 3
Annual cash outflows:
Hours of operation			fill in the blank 4
	Fuel cost per hour	$fill in the blank 5
	Labor cost per hour	fill in the blank 6
	Total fuel and labor costs per hour		$fill in the blank 7
Fuel and labor costs per year				fill in the blank 8
Maintenance costs per year				fill in the blank 9
Annual net cash flow				$fill in the blank 10

b. Determine the net present value of the investment, assuming that the desired rate of return is 20%. Use the table of present value of an annuity of $1 above. If required, round to the nearest dollar and use the minus sign to indicate a negative net present value.

Present value of annual net cash flows	$fill in the blank 11
Less amount to be invested	fill in the blank 12
Net present value	$fill in the blank 13

c. Osborne Excavation should

supportnot support

the investment because the bulldozer cost is

greaterless

than the present value of the cash flows at the

maximumminimum

desired rate of return of 20%.