Calculate the npv of the investment in given case

Assignment Help Finance Basics

Reference no: EM131994923

Question: 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 90 miles in total. Marsha usually gives 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 Nike 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.

Hint: All numbers given in the question are in real term.

Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131994923

Questions Cloud

Calculating the effective annual rate in given problem : Mary purchased 100 shares of Sweet Pea Co. stock at a price of $49.71 six months ago. She sold all stocks today for $46.46. During that period the stock paid.

Identify 3 problems that can occur during the process : Woman with children have some unique family challenges during incarceration and upon their release back into the community.

Find what is the book value of shareholders equity : Martha's Enterprises spent $4,100 to purchase equipment three years ago. This equipment is currently valued at $2,700 on today's balance sheet.

What limitations has the court placed on law enforcement : What limitations has the Court placed on law enforcement in terms of searching closed containers in vehicles? Do you agree with these limitations?

Calculate the npv of the investment in given case : 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.

What is the probability that mr wood average : What is the probability that Mr Wood's average daily sales will be between 16 and 26 business suits?

Properties of least square estimator for linear regression : a) What are important principles of least square estimation for the linear regression

Do you think the given is fair to the home owne : In Massachusetts, insurance companies have the right to decline renewal of a home owner's house insurance if that home owner submits three claims.

What is the bond current yield : A bond that matures in 8 years sells for $960. The bond has a face value of $1,000 and a 9 percent annual coupon. What is the bond's current yield?

User Account

All Pages