a. Determine the equal annual net cash flows from operating the bulldozer. Jones Excavation Company Equal Annual Net Cash Flows Cash inflows: Hours of operation Revenue per hour Revenue per year Cash outflows: Hours of operation Fuel cost per hour Labor cost per hour Total fuel and labor costs per hour Fuel and labor costs per year Maintenance costs per year Annual net cash flows b. Determine the net present value of the investment, assuming that the desired rate of returm is 6%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of annual net cash flows Amount to be invested Net present value c. Should Jones invest in the bulldozer, based on this analysis? ,because the bulldozer cost Yes less than the present value of the cash flows at the minimum desired rate of return of 6%. 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. hours
a. Determine the equal annual net cash flows from operating the bulldozer. Jones Excavation Company Equal Annual Net Cash Flows Cash inflows: Hours of operation Revenue per hour Revenue per year Cash outflows: Hours of operation Fuel cost per hour Labor cost per hour Total fuel and labor costs per hour Fuel and labor costs per year Maintenance costs per year Annual net cash flows b. Determine the net present value of the investment, assuming that the desired rate of returm is 6%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of annual net cash flows Amount to be invested Net present value c. Should Jones invest in the bulldozer, based on this analysis? ,because the bulldozer cost Yes less than the present value of the cash flows at the minimum desired rate of return of 6%. 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. hours
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 14P
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