Problem 6-12 Project NPVMarsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $49,000. The object is to save onhorse transporter rentals.Marsha had been renting a transporter every other week for $214 per day plus $1.70 per mile. Most of the trips are 80 or 100 miles intotal. Marsha usually gives Joe Laminitis, the driver, a $30 tip. With the new transporter she will only have to pay for diesel fuel andmaintenance, at about $0.59 per mile. Insurance costs for Marsha's transporter are $1,900 per year.The transporter will probably be worth $29,000 (in real terms) after eight years, when Marsha's horse Spike will be ready to retire.Assume a nominal discount rate of 8% and a 2% forecasted inflation rate. Marsha's transporter is a personal outlay, not a business orfinancial investment, so taxes can be ignored.Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to the nearest whole dollaramount.)NPV

NPV stands for Net Present Value. It is the capital budgteing technique which is used to calculate…

Answered: Marsha Jones has bought a used Mercedes…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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