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 the driver, Joe Laminitis, 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
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 the driver, Joe Laminitis, 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
Chapter8: Vehicle And Other Major Purchases
Section: Chapter Questions
Problem 1FPC
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![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 the driver, Joe Laminitis, 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.
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
> Answer is complete but not entirely correct.
NPV
S 40,759 X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F07748739-0b60-4981-9829-cf64bca68626%2F0132da25-3289-47bb-b3b9-27d393771d9b%2Fg2elkwi_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 the driver, Joe Laminitis, 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.
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
> Answer is complete but not entirely correct.
NPV
S 40,759 X
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