Net Present Value Method—AnnuityBriggs Excavation Company is planning an investment of $94,900 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $31 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $10,000. The bulldozer uses fuel that is expected to cost $41 per hour of bulldozer operation.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows. Briggs Excavation CompanyEqual Annual Net Cash FlowsCash inflows: fill in the blank 6341b2f9cff2042_2 X $fill in the blank 6341b2f9cff2042_4 $fill in the blank 6341b2f9cff2042_6Cash outflows: fill in the blank 6341b2f9cff2042_8 $fill in the blank 6341b2f9cff2042_10 fill in the blank 6341b2f9cff2042_12 X $fill in the blank 6341b2f9cff2042_14 fill in the blank 6341b2f9cff2042_16 fill in the blank 6341b2f9cff2042_18 $fill in the blank 6341b2f9cff2042_20b. Determine the net present value of the investment, assuming that the desired rate of return is 12%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.Present value of annual net cash flows$fill in the blank b84063f9e046fb8_1Amount to be invested$fill in the blank b84063f9e046fb8_2Net present value$fill in the blank b84063f9e046fb8_3c. Should Briggs Excavation invest in the bulldozer, based on this analysis? , because the bulldozer cost is the present value of the cash flows at the minimum desired rate of return of 12%.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.fill in the blank b84063f9e046fb8_6 hours

Annual net cash flow represents the amount of cash inflow and cash outflow from business for a…

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Managerial Accounting

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ISBN:9781337912020

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Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

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Problem 10E: Net present value methodannuity Jones Excavation Company is planning an investment of 125,000 for a...

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Net Present Value Method—Annuity

Briggs Excavation Company is planning an investment of $94,900 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $31 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $10,000. The bulldozer uses fuel that is expected to cost $41 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	3.353	2.991
6	4.917	4.355	4.111	3.785	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. Use a minus sign to indicate cash outflows.


Briggs Excavation Company
Equal Annual Net Cash Flows
Cash inflows:
		fill in the blank 6341b2f9cff2042_2
		X $fill in the blank 6341b2f9cff2042_4
			$fill in the blank 6341b2f9cff2042_6
Cash outflows:
		fill in the blank 6341b2f9cff2042_8
	$fill in the blank 6341b2f9cff2042_10
	fill in the blank 6341b2f9cff2042_12
		X $fill in the blank 6341b2f9cff2042_14
			fill in the blank 6341b2f9cff2042_16
			fill in the blank 6341b2f9cff2042_18
			$fill in the blank 6341b2f9cff2042_20

b. Determine the net present value of the investment, assuming that the desired rate of return is 12%. Use the 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	$fill in the blank b84063f9e046fb8_1
Amount to be invested	$fill in the blank b84063f9e046fb8_2
Net present value	$fill in the blank b84063f9e046fb8_3

c. Should Briggs Excavation invest in the bulldozer, based on this analysis?
, because the bulldozer cost is the present value of the cash flows at the minimum desired rate of return of 12%.

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.
fill in the blank b84063f9e046fb8_6 hours

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