1. A farmer is considering two different tractors for his business. Each tractor has a different price but also a different life span. The farmer will have to replace either tractor at the end of its useful life and start again. We will assume that the farmer has a discount rate of 10.00%.
MODEL A: Initial cost of $14,029.00, Yearly operating cost of $971.00 for 8.00 years. MODEL B: Initial cost of $12,945.00, Yearly operating cost of $1,503.00 for 10.00 years.
What is the NPV of buying tractor A? (HINT: This will be a negative number)
Answer Format: Currency: Round to: 2 decimal places.
A farmer is considering two different tractors for his business. Each tractor has a different price but also a different life span. The farmer will have to replace either tractor at the end of its useful life and start again. We will assume that the farmer has a discount rate of 11.00%.
MODEL A: Initial cost of $14,766.00, Yearly operating cost of $942.00 for 7.00 years. MODEL B: Initial cost of $12,460.00, Yearly operating cost of $1,515.00 for 9.00 years.
What is the NPV of buying project B? (HINT: The NPV will be negative)
Answer Format: Currency: Round to: 2 decimal places.