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Management Studies

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

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

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92704992

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