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Problem - Lazy River World is considering purchasing a water park in Chattanooga, Tennessee, for $1,950,000. The new facility will generate annual net cash inflows of $505,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of 10% or more. Management uses a 14% hurdle rate on investments of this nature.
Requirements -
1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment.
2. Recommend whether the company should invest in this project.
Bombs Away Video Games Corporation, Construct a monthly production and inventory schedule in units. Beginning inventory in January is 40,000 units.
Assuming that the cash inflows occur evenly over the year, the payback period for the investment is? What is the payback reciprocal?
How many items need to be produced for inventory to meet the earnings target if the sales commission is left unchanged at 5%?
What type of situations would capital budgeting decisions be made solely on the basis of project's net present value? Are there any potential reasons.
In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.
How many units must Corrigan sell to earn $956,400 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average
Prepare a budgeted income statement for June and prepare a budgeted balance sheet as of June 30
Determine the current weighted average cost of capital for CWC - determine the appropriate discount rate for the healthy bottled water project.
Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel. What is the break-even point in number of rooms
Calculate the improvement in Sportway's total contribution margin if it adopts the optimal strategy rather than continuing with the status quo.
The expected annual return on the fund is 10 percent. She plans to invest for 19 years. What is the present value of Alysha's investments?
How many pounds must be sold to break even, and how many pounds must be sold to earn a profit of 10,000 per month?
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