Determine the net present value of the investment

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Problem - Net present value method-annuity - Osborne Excavation Company is planning an investment of $315,000 for a bulldozer. The bulldozer is expected to operate for 1,850 hours per year for five years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $37 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $9,750. The bulldozer uses fuel that is expected to cost $48 per hour of bulldozer operation.

Required -

a. Determine the equal annual net cash flows from operating the bulldozer.

b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present values of an annuity of $1 in the chapter. Round to the nearest dollar.

c. Should Osborne Excavation invest in the bulldozer, based on this analysis?

Reference no: EM132706946

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