NEED HELP with ACC 2020 problem!! Magic Corporation, an amusement park, is consi
ID: 2469832 • Letter: N
Question
NEED HELP with ACC 2020 problem!!
Magic Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $172,752 and have an estimated useful life of 8 years. It will be sold for $71,800 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $26,500. The company's borrowing rate is 8%. Its cost of capital is 10%. Calculate the net present value of this project to the company and determine whether the project is acceptable. Net present value $Explanation / Answer
Net annual cash flow = $26500 (The borrowing costs is already adjusted)
NPV of the project
= - $172752 + $26500 x PVIFA(10%, 8) + $71800 x PVIF(10%,8)
= - $172752 +$26500 x 5.33492 + $71800 x 0.46651
= $2119
The project is accepted.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.