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The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is 3,500,000 and it will cost an additional 250,000 to have it installed. The equipment has an expected life of 6 years, and it will be depreciated using a MACRS 7-year class life. Management expects to run about 150 rides per day, with each ride averaging 25 riders. The season will last for 120 days per year. In the first year, the ticket price per rider is expected to be $4.00, and it will be increased by 4% per year. The variable cost per rider will be $1.40, and total fixed costs will be $320,000 per year. After six years, the ride will be dismantled at a cost of $115,000 and the parts will be sold for $450,000. The cost of capital is 12%, and its marginal tax rate is 35%. a) Calculate the initial outlay, annual after-tax cash flow for each year and the terminal cash flow. b) Calculate the NPV, IRR, and MIRR of the new equipment. Is the project acceptable? c) Using the Goal Seek tool, calculate the minimum ticket price that must be charged in the first year in order to make the project acceptable.
Your company is considering whether to in source or to purchase a part for your product. In order to produce the part yourself, you will need to purchase the raw materials for a cost of $800 per part. It takes 6 months to create 90 parts. What would ..
Mark Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris’s analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipmen..
what are divas projected profits for the fiscal year ending september 1995?what factors affect a firms exposure to
Please show me step-by-step instruction using the Future Value of Annuity formula to solve the following: My grandchild will be attending Rutgers University Medical School in New Jersey; four-year college, in year 2036. The college tuition and fees f..
Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $288,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years..
You started an education fund for your child. You are expecting him/her to attend college 18 years from now. According to statistics, the expected amount you will need 18 years later should be $300,000. If the fund provides a rate of return of 10% pe..
A young boy invested $50 to plant Christmas trees on his grandfather’s farm. When the boy was a freshman in college, six years later, he harvested the trees and sold them for $400. What annual rate of return (i.e. interest rate) did he learn on the i..
The Morris Company is attempting to determine its cost of capital in order to evaluate several proposed capital projects and set its capital budget for next year. The following information has been made available: Target capital structure is 40% debt..
Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?
Cost of project= $5,676.10 WACC= 11% Year 1 cash inflow $1000 year 2 cash inflow $1500 year 3 cash inflow $2000 year 4 cash inflow $3000 year 5 cash inflow $1600 Calculate the modified internal rate of return for this project.
Fido's Dog Spa's financial statements show that its total assets equal $100,000, its return on assets is 3% and its return on equity is 5%. Compute the company's net income. What portion of total assets is financed with dept?
Capital gains taxes Perkins Manufacturing is considering the sale of two nondepreciable assets, X and Y. Asset X was purchased for $2,000 and will be sold today for $2,250. Asset Y was purchased for $30,000 and will be sold today for $35,000. The fir..
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