Brief Exercise 24-3 Your answer is partially correct. Try again. Magic Corporati

Question

Brief Exercise 24-3 Your answer is partially correct. Try again. Magic Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $173,454 and have an estimated useful life of 7 years. It will be sold for $67,500 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $29,000. The company's borrowing rate is 8%. Its cost of capital is 10%. lick here (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use le either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value to 0 decimal places, e.g. 125.) Net present value 30762.48 The projectIS acceptable. LINK TO TEXT Question Attempts: 3 of 5 used SAVE FOR LATER UBMIT ANSWER policy © 2000-2016 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc Version 4.18.0.4

Explanation / Answer

Present value of cash inflow = (PVAF@10%, 7 * Cash inflow )+(PVF@10%,7 *Salvage)

                                                = (5.38929* 29000) + (.62275* 67500)

                                               = 156289.39+ 42035.63

                                               = 198,325.02

NPV = 198,325.02 - 173454= 24871.02

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