A five years ago the city spent 30000 to buy a computerized

Assignment Help Financial Accounting

Reference no: EM13352134

(a) Five years ago, the City spent $30,000 to buy a computerized radar system. Currently, a sales rep told the city manager about a new and better radar system that will be purchased for $50,000. The rep also told the manager that the company would provide the city $10,000 in trade on the old system. The new system will last 10 years. The old system may also last that long but only if a $4,000 upgrade is done in 5 years. The manager assembled the subsequent information to use in the decision as to which system is more desirable:

Old System New System

Cost of radar system ...................... $30,000 $50,000

Current salvage value .................... $10,000 -

Salvage value in 10 years .............. $5,000 $8,000

Annual operating costs .................. $34,000 $29,000

Upgrade required in 5 years .......... $4,000 -

Discount rate .................................. 14% 14%

Required: Should the City buy the new system or keep the old system (prove it)?

(b) The management of an amusement park is allowing for purchasing a new ride for $40,000 that would have a useful life of 10 years and a salvage value of $5,000. The ride would need annual operating costs of $21,000 throughout its useful life. The company's discount rate is 13 percent. Management is unsure about how much additional ticket revenue the new ride would prepare particularly since customers pay a flat fee when they enter the park that entitles them to unlimited rides. optimistically, the presence of the ride would attract new customers.

Required:

How much additional revenue could the ride have to prepare per year to make it an attractive investment?

Reference no: EM13352134

Questions Cloud

Adcock corp had 500000 net loss in 2012 on 1st january 2012 : adcock corp. had 500000 net loss in 2012. on 1st january 2012 there were 200000 shares of common stock outstanding. on

Mark womer as well as brian perry were members of the u s : mark womer as well as brian perry were members of the u. s. navy and were stationed in newport rhode island. on april

Analytical procedures are used as risk assessment : analytical procedures are used as risk assessment procedures while asa 520 stipulates their use as substantive

Not only did our salespeople do a superior job in meeting : not only did our salespeople do a superior job in meeting the sales budget this year but our manufacture people did a

A five years ago the city spent 30000 to buy a computerized : a five years ago the city spent 30000 to buy a computerized radar system. currently a sales rep told the city manager

2 kirkland conveyed a farm to sandler to have as well as to : 2 kirkland conveyed a farm to sandler to have as well as to hold for and during his life and on sandlers death to

The cfo for fin tackle company a manufacturer of fine : the cfo for fin tackle company a manufacturer of fine completing supplies has provided you the subsequent information

In 1972 ogle possessed two adjoining lots numbered 6 and 7 : in 1972 ogle possessed two adjoining lots numbered 6 and 7 fronting at the north on a city street. in that year she

Multiple product cvp analysis hawaiian fruit pizza was a : multiple product cvp analysis hawaiian fruit pizza was a huge success and fairfield pizza has decided to start a second

User Account

All Pages