A new excavator costs $20,000 when purchased and has an annual maintenance cost of $1000. The salvage value after 5 years is $7000. The new excavator is expected to bring in $5000/year in profits. Assuming an annual interest rate of 8%, is the excavator worth buying? Draw the cash flow diagram.

Fundamentals Of Construction Estimating
4th Edition
ISBN:9781337399395
Author:Pratt, David J.
Publisher:Pratt, David J.
Chapter9: Pricing Construction Equipment
Section: Chapter Questions
Problem 6RQ
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A new excavator costs $20,000 when purchased and has an annual maintenance cost of $1000. The salvage value after 5 years is $7000. The new excavator is expected to bring in $5000/year in profits. Assuming an annual interest rate of 8%, is the excavator worth buying? Draw the cash flow diagram.
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