Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $47,000....

4.4 Ratings (846 Votes)

Real discount rate=nominal discount rate-inflation rate=9%-3%=6%

Considering, 1 year=52 week, yearly rental savings=212*52=$11024

Per mile savings=(1.60-0.57)=$1.03 and hence yearly savings=1.03*90*52=4820.4

Driver's tip savings=52*50=2600

Now,

Year	Initial Investment	Salavage Value	Rental Savings	Driver Tip savings	Fuel Savings	Insurace Cost	Cash Flow (Sum(B:G))	Discounted cashflow (Cash flow/1.06^year)
0	(47,000.00)	-	-	-	-	-	(47,000.00)	(47,000.00)
1	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	15,702.26
2	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	14,813.46
3	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	13,974.96
4	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	13,183.92
5	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	12,437.66
6	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	11,733.65
7	-	-	11,024.00	2,600.00	4,820.40	(1,800.00)	16,644.40	11,069.48
8	-	27,000.00	11,024.00	2,600.00	4,820.40	(1,800.00)	43,644.40	27,383.04
							NPV (Total Present Value)	73,298.43

Hence, NPV=$73298

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