Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $47,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $212 per day plus $1.60 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $50 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.57 per mile. Insurance costs for Marsha's transporter are $1,800 per year. The transporter will probably be worth $27,000 (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 3% 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
Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $47,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $212 per day plus $1.60 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $50 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.57 per mile. Insurance costs for Marsha's transporter are $1,800 per year. The transporter will probably be worth $27,000 (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 3% 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
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
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Question
A 91.
Transcribed Image Text:Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $47,000. The
object is to save on horse transporter rentals.
Marsha had been renting a transporter every other week for $212 per day plus $1.60 per mile. Most of the trips are
80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $50 tip. With the new transporter she will
only have to pay for diesel fuel and maintenance, at about $0.57 per mile. Insurance costs for Marsha's transporter
are $1,800 per year.
The transporter will probably be worth $27,000 (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 3% 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
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