Question

E &T Excavation Company is planning an investment of $288,300 for a bulldozer. The buldozer is expected to operate for 3,000 hours per year for eight years. Customers will be charged $105 per hour for builldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $30,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20 % 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. E and T Excavation Company Equal Annual Net Cash Flow Cash inflows: Cash outflows:

Answer 1

Solution 1n ves tment: 288 300 J000 C1os) Revenue per yeaj 315 o 00 3000 C32) opeating Cost pes yeai 9b o00 39000 Annual maintenance cost 42 C3 000) Fuel cost pei Yeas :126, 000 Cash inflow cash outPlo S-NO Revenue pes yead IS,000 operating Cost pes yeas 96, 000 $2 maintena ne COSt Annual 30 000 Cost fuct pes yeas 126,000 Total 315,000 252,000 Net Cash flow pes yea 315,000 -252,000 63,000

(b) cash low fo gyeas = 63000x Annuity fach CRG gycas) PV of net 63,000(3-831) = 2414731 OP annual nel pesent Value Cash Plow 63, 000 288,300 less amount to be inVG d - 225, 300 Nct Pesent value Should not e gative Piesent valve is Net this pyoject invegt in opesaling hous Le t CxClos) -xC32) XC42) 30,00)3 837= 63000 (2 88300) 3.837 000 t 3IX lo5,136. 82S X 3,391.S