How additional revenue would ride have to generate per year

Reference no: EM131910060

Problem

The management of an amusement park is considering purchasing a new ride for $72,000 that would have a useful life of 9 years and a salvage value of $8,000. The ride would require annual operating costs of $36,000 throughout its useful life. The company's discount rate is 11%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers. (Ignore income taxes.)

Required: How much additional revenue would the ride have to generate per year to make it an attractive investment?

Reference no: EM131910060

Questions Cloud

Prepare comparative condensed income statements under fifo : The management of National Inc. asks your help in determining comparative effects. Prepare comparative condensed income statements for 2017 under FIFO and LIFO.

What is your estimate of its wacc : You would like to estimate the weighted average cost of capital for a new airline business.

Impact of society on individual thoughts : How do sociologists study the impact of society on individual thoughts, feelings, and behavior?

Explain the difference between reinforcement and punishment : Explain the difference between Reinforcement and Punishment in Operant Conditioning.

How additional revenue would ride have to generate per year : How much additional revenue would the ride have to generate per year to make it an attractive investment?

What should be done based on the calculations : Calculate the control charts (UCL, CL, and LCL) for each operator-machine combination separately. Do this for both x-bar (average) and range charts.

What is the effective interest rate : A man has a simple discount note for $6,600, at an ordinary bank discount rate of 8.84%, for 60 days. What is the effective interest rate?

Identify potential threats to reduce the independence threat : Identify potential threats to independence & recommend safeguards to reduce the independence threat

Determine how to maximize your cash on hand three years : You can invest at most $5000 in any one of plans A. B. or C. Determine how to maximize your cash on hand three years from now.

User Account

All Pages