Question D b. Determine the net present value of the investment, assuming that the desired rate of return is 12%. Use thepresent value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign toindicate a negative net present value.Present value of annual net cash flowsAmount to be investedNet present value$$331,660-348,200-16,540c. Should Jones invest in the bulldozer, based on this analysis?No - ✓, because the bulldozer cost is more than ▾ the present value of the cash flows at the minimumdesired rate of return of 12%.d. Determine the number of operating hours such that the present value of cash flows equals the amount to beinvested. Round interim calculations and final answer to the nearest whole number.2,082 X hours Jones Excavation Company is planning an investment of $348,200 for a bulldozer. The bulldozer is expected tooperate for 2,000 hours per year for 5 years. Customers will be charged $125 per hour for bulldozer work. Thebulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annualmaintenance costing $20,000. The bulldozer uses fuel that is expected to cost $39 per hour of bulldozer operation.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%123456789100.9431.8332.6733.4654.2124.9175.5826.2106.8027.360Cash inflows:Hours of operationRevenue per hourRevenue per yearCash outflows:Hours of operation0.9091.7362.4873.170Line Item DescriptionFuel cost per hour3.7914.3554.868Labor cost per hour5.3355.7596.1450.8931.6902.402Fuel and labor costs per year3.0373.6054.1114.5644.9685.3285.6500.8701.626Total fuel and labor costs per hour2.2832.8553.3533.7854.1604.4874.7725.0190.8331.528a. Determine the equal annual net cash flows from operating the bulldozer.2.1062.5892.9913.3263.6053.8374.0314.192Jones Excavation CompanyEqual Annual Net Cash FlowsAmount39曰:30X $x $Amount2,0001252,00069$Amount250,000138,000

Net cash flow is determined by reducing the cash outflows from the cash inflows of the organization.…

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. 2,082 X hours

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. 2,082 X hours

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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