Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $54,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $219 per day plus $1.95 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $30 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.64 per mile. Insurance costs for Marsha’s transporter are $2,150 per year. The transporter will probably be worth $34,000 (in real terms) after eight years, when Marsha’s horse Spike will be ready to retire. Assume a nominal discount rate of 7% and a 4% 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 estate. It cost $54,000. The object is to save on horse transporter rentals.
Marsha had been renting a transporter every other week for $219 per day plus $1.95 per mile. Most of the trips are 80 or 100 miles in total. Marsha usually gives Joe Laminitis, the driver, a $30 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.64 per mile. Insurance costs for Marsha’s transporter are $2,150 per year.
The transporter will probably be worth $34,000 (in real terms) after eight years, when Marsha’s horse Spike will be ready to retire. Assume a nominal discount rate of 7% and a 4%
Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
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