Briggs Excavation Company is planning an investment of $94,900 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $31 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $10,000. The bulldozer uses fuel that is expected to cost $41 per hour of bulldozer operation.
| Present Value of an Annuity of $1 at |
|||||
| 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. Use a minus sign to indicate
| Briggs Excavation Company | |||
| Equal Annual Net Cash Flows | |||
| fill in the blank 6341b2f9cff2042_2 | |||
| X $fill in the blank 6341b2f9cff2042_4 | |||
| $fill in the blank 6341b2f9cff2042_6 | |||
| Cash outflows: | |||
| fill in the blank 6341b2f9cff2042_8 | |||
| $fill in the blank 6341b2f9cff2042_10 | |||
| fill in the blank 6341b2f9cff2042_12 | |||
| X $fill in the blank 6341b2f9cff2042_14 | |||
| fill in the blank 6341b2f9cff2042_16 | |||
| fill in the blank 6341b2f9cff2042_18 | |||
| $fill in the blank 6341b2f9cff2042_20 |
b. Determine the net present value of the investment, assuming that the desired
| Present value of annual net cash flows | $fill in the blank b84063f9e046fb8_1 |
| Amount to be invested | $fill in the blank b84063f9e046fb8_2 |
| Net present value | $fill in the blank b84063f9e046fb8_3 |
c. Should Briggs Excavation invest in the bulldozer, based on this analysis?
, because the bulldozer cost is 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.
fill in the blank b84063f9e046fb8_6 hours
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