Evaluate the npv of the investment

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Reference no: EM131996160

Question: Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $55,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every other week for $220 per day plus $2.00 per mile. Most of the trips are 90 miles in total. Marsha usually gives the driver a $40 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.65 per mile. Insurance costs for Marsha's transporter are $2,200 per year. The transporter will probably be worth $35,000 (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 2% 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.

Reference no: EM131996160

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