1. Your company plans to purchase a new track hoe and has narrowed the selection to two pieces of equipment. Track hoe A costs $100,000 and costs $32.00 per hour to operate. Track hoe B costs $110,000 and costs $27.00 per hour to operate. The operator costs $28.00 per hour. The revenue from either track hoe is $95.00 per hour. Using a useful life of four years, a salvage value equal to 20% of the purchase price, 1,200 billable hours per year, and a MARR of 20%, calculate the NPV for both track hoes. Which track hoe should your company choose? I Company should choose Second Track because NPV is greater. 2. Calculate the incremental NPV for the problem 1. Which track hoe should your company choose?
1. Your company plans to purchase a new track hoe and has narrowed the selection to two pieces of equipment. Track hoe A costs $100,000 and costs $32.00 per hour to operate. Track hoe B costs $110,000 and costs $27.00 per hour to operate. The operator costs $28.00 per hour. The revenue from either track hoe is $95.00 per hour. Using a useful life of four years, a salvage value equal to 20% of the purchase price, 1,200 billable hours per year, and a MARR of 20%, calculate the NPV for both track hoes. Which track hoe should your company choose? I Company should choose Second Track because NPV is greater. 2. Calculate the incremental NPV for the problem 1. Which track hoe should your company choose?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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N1.
Transcribed Image Text:1. Your company plans to purchase a new track hoe and has narrowed the selection to two pieces of
equipment. Track hoe A costs $100,000 and costs $32.00 per hour to operate. Track hoe B costs $110,000
and costs $27.00 per hour to operate. The operator costs $28.00 per hour. The revenue from either track
hoe is $95.00 per hour. Using a useful life of four years, a salvage value equal to 20% of the purchase
price, 1,200 billable hours per year, and a MARR of 20%, calculate the NPV for both track hoes. Which
track hoe should your company choose?
I
Company should choose Second Track because NPV is greater.
2. Calculate the incremental NPV for the problem 1. Which track hoe should your company choose?
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