Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estat It cost $55,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $220 per day plus $2.00 p mile. Most of the trips are 80 or 100 miles In total. Marsha usually gives Joe Laminitis, th driver, a $40 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.65 per mile. Insurance costs for Marsha's transporter are $2,200 per year. The transporter will probably be worth $35,000 (in real terms) after eight years, when Marsha's horse Spike will be ready to retire. Assume a nominal discount rate of 9% and 2% forecasted Inflation rate. Marsha's transporter is a personal outlay, not a business or financial Investment, so taxes can be ignored. Calculate the NPV of the Investment. (Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount.)
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estat It cost $55,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $220 per day plus $2.00 p mile. Most of the trips are 80 or 100 miles In total. Marsha usually gives Joe Laminitis, th driver, a $40 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.65 per mile. Insurance costs for Marsha's transporter are $2,200 per year. The transporter will probably be worth $35,000 (in real terms) after eight years, when Marsha's horse Spike will be ready to retire. Assume a nominal discount rate of 9% and 2% forecasted Inflation rate. Marsha's transporter is a personal outlay, not a business or financial Investment, so taxes can be ignored. Calculate the NPV of the Investment. (Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount.)
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
Related questions
Question
Transcribed Image Text:Problem 6-12 Project NPV
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate.
It cost $55,000. The object is to save on horse transporter rentals.
Marsha had been renting a transporter every other week for $220 per day plus $2.00 per
mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the
driver, a $40 tip. With the new transporter she will only have to pay for diesel fuel and
maintenance, at about $0.65 per mile. Insurance costs for Marsha's transporter are
$2,200 per year.
The transporter will probably be worth $35,000 (in real terms) after eight years, when
Marsha's horse Spike will be ready to retire. Assume a nominal discount rate of 9% and a
2% forecasted Inflation rate. Marsha's transporter is a personal outlay, not a business or
financial Investment, so taxes can be ignored.
Calculate the NPV of the Investment. (Do not round Intermediate calculations. Round
your answer to the nearest whole dollar amount.)
NPV
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education