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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. 2,082 X hours

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. 2,082 X hours

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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b. Determine the net present value of the investment, assuming that the desired rate of return is 12%. 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 $ $ 331,660 -348,200 -16,540 c. Should Jones invest in the bulldozer, based on this analysis? No - ✓, because the bulldozer cost is more than ▾ the present value of the cash flows at the minimum desired rate of return of 12%. 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. 2,082 X hours
Transcribed Image Text:b. Determine the net present value of the investment, assuming that the desired rate of return is 12%. 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 $ $ 331,660 -348,200 -16,540 c. Should Jones invest in the bulldozer, based on this analysis? No - ✓, because the bulldozer cost is more than ▾ the present value of the cash flows at the minimum desired rate of return of 12%. 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. 2,082 X hours
Jones Excavation Company is planning an investment of $348,200 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 5 years. Customers will be charged $125 per hour for bulldozer work. The bulldozer operator costs $30 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 $39 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 3 4 5 6 7 8 9 10 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 Cash inflows: Hours of operation Revenue per hour Revenue per year Cash outflows: Hours of operation 0.909 1.736 2.487 3.170 Line Item Description Fuel cost per hour 3.791 4.355 4.868 Labor cost per hour 5.335 5.759 6.145 0.893 1.690 2.402 Fuel and labor costs per year 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.870 1.626 Total fuel and labor costs per hour 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 0.833 1.528 a. Determine the equal annual net cash flows from operating the bulldozer. 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 Jones Excavation Company Equal Annual Net Cash Flows Amount 39 曰: 30 X $ x $ Amount 2,000 125 2,000 69 $ Amount 250,000 138,000
Transcribed Image Text:Jones Excavation Company is planning an investment of $348,200 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 5 years. Customers will be charged $125 per hour for bulldozer work. The bulldozer operator costs $30 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 $39 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 3 4 5 6 7 8 9 10 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 Cash inflows: Hours of operation Revenue per hour Revenue per year Cash outflows: Hours of operation 0.909 1.736 2.487 3.170 Line Item Description Fuel cost per hour 3.791 4.355 4.868 Labor cost per hour 5.335 5.759 6.145 0.893 1.690 2.402 Fuel and labor costs per year 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.870 1.626 Total fuel and labor costs per hour 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 0.833 1.528 a. Determine the equal annual net cash flows from operating the bulldozer. 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 Jones Excavation Company Equal Annual Net Cash Flows Amount 39 曰: 30 X $ x $ Amount 2,000 125 2,000 69 $ Amount 250,000 138,000
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