Net present worth of boat-buying a boat


Buying A Boat:

A Commercial Fisherman needs to purchase a new boat. He is considering three alternatives A, B & C. Boat A costs $200,000. and is expected to produce net revenues of $50,000 per year. Boat B costs $290,000 and is expected to produce net revenues of $75,000 per year. Boat C costs $225,000 and is expected to produce revenues of $60,000 per year. Salvage value at the end of the five year life of each boat is estimated to be $25,000. The fisherman's minimum attractive rate of return is 6%.

1. The Net Present Worth of Boat A is:

(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

2. The Net Present Worth of Boat B is:

(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

3. The Net Present Worth of Boat A is:

(Express your answer to 3 significant digits with trailing zeros as required: XXX00., or XXX0., or XXX. for positive present worth or -XXX00., -XXX0. or -XXX. for negative present worth)

4. What should the Fisherman do?

  • Buy Boat A
  • Buy Boat B
  • Buy Boat C
  • Do Nothing

Solution Preview :

Prepared by a verified Expert
Microeconomics: Net present worth of boat-buying a boat
Reference No:- TGS01748217

Now Priced at $20 (50% Discount)

Recommended (95%)

Rated (4.7/5)