Net Present Value Method A series of equal cash flows at fixed intervals.Annuity

E & T Excavation Company is planning an investment of $466,600 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for 10 years. Customers will be charged $125 per hour for bulldozer work. The bulldozer operator costs $27 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $35 per hour of bulldozer operation.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	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
9	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:
Hours of operation Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour
Revenue per hour Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per hour		X $
Revenue per year Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per year			$
Cash outflows:
Hours of operation Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour
Fuel cost per hour Annual net cash flow Fuel cost per hour Revenue per year Revenue per hour	$
Labor cost per hour Annual net cash flow Labor cost per hour Revenue per year Revenue per hour
Total fuel and labor costs per hour Annual net cash flow Total fuel and labor costs per hour Revenue per year Revenue per hour		X $
Fuel and labor costs per year Annual net cash flow Fuel and labor costs per year Revenue per year Revenue per hour
Maintenance costs per year Annual net cash flow Maintenance costs per year Revenue per year Revenue per hour
Annual net cash flow Annual net cash flow Hours of operation Revenue per year Revenue per hour			$

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a. Subtract the operating expenses (hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs) from the revenues (operating hours multiplied by the hourly revenue).

Learning Objective 3.

b. Determine the net present value of the investment, assuming that the desired rate of return is 20%. Use the The sum of the present values of a series of equal cash flows to be received at fixed intervals.present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.

Present value of annual net cash flows	$
Less amount to be invested	$
Net present value	$

c. Should E & T invest in the bulldozer, based on this analysis? No

Yes

No

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. hours

I really need the answer of letter d. would you be explicit and lay out the work.