E & T Excavation Company is planning an investment of

E & T Excavation Company is planning an investment of $245,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five years. Customers will be charged $130 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $15,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation.
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 E & T invest in the bulldozer, based on this analysis?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...


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