By using the net-present-value method determine whether stl

Reference no: EM13482714

1. Straightforward net-present-value and payback computations

STL Entertainment is considering the acquisition of a sight-seeing boat for summer tours along the Mississippi River. The following information is available:

Cost of boat $500,000

Service life 10 summer seasons

Disposal value at the end of 10 seasons $100,000

Capacity per trip 300 passengers

Fixed operating costs per season (including straight-line depreciation) $160,000

Variable operating costs per trip $1,000

Ticket price $5 per passenger

All operating costs, except depreciation, require cash outlays. On the basis of similar operations in other parts of the country, management anticipates that each trip will be sold out and that 120,000 passengers will be carried each season. Ignore income taxes.

Instructions:

By using the net-present-value method, determine whether STL Entertainment should acquire the boat. Assume a 14% desired return on all investments- round calculations to the nearest dollar.

Reference no: EM13482714

Questions Cloud

Also bottom line is it better to pay healthcare premiums : my old job allowed me to have my health insurance premiums deductedfrom my paycheck with before tax dollars. my new job

The income statement line item that shows the performance : the income statement line item that shows the performance of operating activities without consideration of financing is

Jorge company bottles and distributes b-lite a diet soft : jorge company bottles and distributes b-lite a diet soft drink. the beverage is sold for 50 cents per 16-ounce bottle

Expenses for feb totaled 131000 of which 108000 was paid in : on february 1 2010 the balance of the retained earnings account of blue power corp. was 630000. revenues for feb.

By using the net-present-value method determine whether stl : 1. straightforward net-present-value and payback computationsstl entertainment is considering the acquisition of a

Calculate the amount of payroll taxes to be paid by bailey : bailey dry cleaners has six employees who were paid the following wages during 2010 frank johnson 27000 bill long

Calculate the amount of net income reported on abc companys : abc company employs a periodic inventory system and sells its inventory to customers for 20 per unit. abc company had

The underwriters will charge 23 per bond in flatation costs : corporations marginal tax rate is 40. it can issue 3-year bonds witha coupon rate of 8.5 and par value of 1000. the

Bhemian links inc produces sausages in three production : bohemian links inc. produces sausages in three production departments-mixing casing and curing and packaging. in the

User Account

All Pages