Question

Consider the following two tractors a company can purchase. The following tables provide the costs the company will incur (in thousands of dollars) in the lifetime of each tractor. Expected Life Diesel Gasoline Initial Cost $19,000 $9,000 Operating Costs per Year $7,000 $13,000 The transportation firm can only afford one of the tractors. The two tractors have identical production capabilities. The firm's cost of capital is 6% Find the present value of the costs of using the two tractors. Diesel = Number Gasoline = Number Click "Verify" to proceed to the next part of the question

Answer 1

Present value - Diesel
Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.06^a	d=b*c
0	$   -19,000	1	$         -19,000.00
1	$     -7,000	0.943396	$           -6,603.77
2	$     -7,000	0.889996	$           -6,229.98
3	$     -7,000	0.839619	$           -5,877.33
4	$     -7,000	0.792094	$           -5,544.66
5	$     -7,000	0.747258	$           -5,230.81
6	$     -7,000	0.704961	$           -4,934.72
7	$     -7,000	0.665057	$           -4,655.40
	Present value		$         -58,076.67
Present value - Diesel
Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.06^a	d=b*c
0	$     -9,000	1	$           -9,000.00
1	$   -13,000	0.943396	$         -12,264.15
2	$   -13,000	0.889996	$         -11,569.95
3	$   -13,000	0.839619	$         -10,915.05
4	$   -13,000	0.792094	$         -10,297.22
	Present value		$         -54,046.37
Note: Student can enter positive values.
	Please upvote.