Briggs Excavation Company is planning an investment of $108,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for six years. Customers will be charged $105 per hour for bulldozer work. The bulldozer operator costs $34 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 $45 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
Briggs Excavation Company is planning an investment of $108,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for six years. Customers will be charged $105 per hour for bulldozer work. The bulldozer operator costs $34 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 $45 per hour of bulldozer operation.
| 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 |
Question Content Area
a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate
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Hours of operation | ||
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X $Revenue per hour | ||
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$Revenue per year | ||
| Cash outflows: | |||
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Hours of operation | ||
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$Fuel cost per hour | ||
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Labor cost per hour | ||
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X $Total fuel and labor costs per hour | ||
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Fuel and labor costs per year | ||
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Maintenance costs per year | ||
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$Annual net cash flows |
Feedback Area
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.
Question Content Area
b. Determine the
| Present value of annual net cash flows | $fill in the blank d6e8f5f69011fe9_1 |
| Amount to be invested | $fill in the blank d6e8f5f69011fe9_2 |
| Net present value | $fill in the blank d6e8f5f69011fe9_3 |
c. Should Briggs Excavation invest in the bulldozer, based on this analysis?
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.
fill in the blank d6e8f5f69011fe9_6 hours
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