I was thinking about the topic B. What would be the answer : b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment. It will takeenter your response hereyears.(Enter your response rounded to two decimalplaces.) The Astro World amusement park has the opportunity to expand its size now (the end of year 0) by purchasing adjacent property for $225,000 andadding attractions at a cost of $550,000. This expansion is expected to increase attendance by 30 percent over projected attendance withoutexpansion. The price of admission is $35, with a $5 increase planned for the beginning of year 3. Additional operating costs are expected to be$100,000 per year. Estimated attendance for the next five years, without expansion, is as follows:Year124Attendance30,00035,00037,50039,00040,000a. What are the pretax combined cash flows for years 0 through 5 that are attributable to the park's expansion?The cash flows attributable to the park's expansion in year 0 are $(Enter your response as an integer.)The cash flows attributable to the park's expansion in year 1 are $(Enter your response as an integer.)The cash flows attributable to the park's expansion in year 2 are $(Enter your response as an integer.)The cash flows attributable to the park's expansion in year 3 are $(Enter your response as an integer.)The cash flows attributable to the park's expansion in year 4 are $(Enter your response as an integer.)The cash flows attributable to the park's expansion in year 5 are $ . (Enter your response as an integer.)b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment.It will takeyears. (Enter your response rounded to two decimal places.)

Payback period is a capital budgeting technique which helps the company in knowing that in…

I was thinking about the topic B. What would be the answer : b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment. It will takeenter your response hereyears.(Enter your response rounded to two decimal places.)

I was thinking about the topic B. What would be the answer : b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment. It will takeenter your response hereyears.(Enter your response rounded to two decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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The Astro World amusement park has the opportunity to expand its size now (the end of year 0) by purchasing adjacent property for $250,000 and adding attractions at a cost of $550,000. This expansion is expected to increase attendance by 30 percent over projected attendance without expansion. The price of admission is $30, with a $5 increase planned for the beginning of year 3. Additional operating costs are expected to be $100,000 per year. Estimated attendance for the next five years, without expansion, is as follows: Year 1 2 3 4 5 Attendance 30,000 34,000 36,250 38,500 41,000 a. What are the pretax combined cash flows for years 0 through 5 that are attributable to the park’s expansion?b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) the investment.
The Astro World amusement park has the opportunityto expand its size now (the end of year 0) by purchasingadjacent property for $250,000 and adding attractions ata cost of $550,000. This expansion is expected to increaseattendance by 30 percent over projected attendance with-out expansion. The price of admission is $30, with a $5increase planned for the beginning of year 3. Additionaloperating costs are expected to be $100,000 per year.Estimated attendance for the next five years, withoutexpansion, is as follows:Year 1 2 3 4 5Attendance 30,000 34,000 36,250 38,500 41,000a. What are the pretax combined cash flows for years 0through 5 that are attributable to the park’s expansion?b. Ignoring tax, depreciation, and the time value of money,determine how long it will take to recover (pay back) theinvestment.
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
A local municipality is considering investing $210,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 15-year period as shown in the cash flow profile given below in thousands of dollars. Notice, an intermediate investment of $130,000 is anticipated in the 6th year of the investment. Based on a MARR of 3%, use benefit-cost ratio analysis to determine whether the investment should be made. (All values in thousand dollars) End-of Year Net Cash Costs Benefits Flow 0 $210 -$210 1 $70 $115 $45 2 $70 $125 $55 3 $70 $135 $65 4 $70 $145 $75 5 $70 $155 $85 67 $200 $165 -$35 $70 $155 $85 8 $70 $145 $75 6 $70 $135 $65 10 $70 $125 $55 11 $70 $115 $45 12 $70 05 $35 W 13 $70 $95 $25 14 $70 $85 $15 15 $70 $75 $5 Click here to access the TVM Factor Table calculator. B/C- final answer to 4 decimal places. The tolerance is 10.0003.
The management company you retain to oversee and lease your 20-year old, 100,000 square foot warehouse has come to you with a proposal to upgrade the warehouse including new loading docks to accommodate "no lift" tractor trailers and energy efficient lighting. You are thinking about selling the warehouse next year. If the capital investment for these improvements equals $500,000 and an associated net rent increase of $1.00 per square foot can be achieved once improvements are completed. Cap rates for warehouses of your vintage are estimated to be 7%. Similar warehouses in your market have sold within 6 months on average. Would you make this investment? Why?
The town of Podunk is considering building a new downtown parking lot. The land will cost $25,000, and the construction cost of the lot will be $150,000. Each year, costs associated with the lot will be $17,500. The income from the lot is $18,000 the first year, increasing by $3500 each year for the 12-year expected life of the lot. Determine the B/C ratio if Podunk uses a cost of money of 4%.
Consider how Root Valley Waterfall Park Lodge could use capital budgeting to decide whether the $12,500,000 Waterfall Park Lodge expansion would be a good investment. Assume Root Valley's managers developed the following estimates concerning the expansion: 1(Click the icon to view the estimates.) Assume that Root Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $950,000 at the end of its eleven-year life. The average annual net cash inflow from the expansion is expected to be $2,892,254. Compute the payback for the expansion project. Round to one decimal place. (1) ÷ (2) = Payback ÷ = years 1: Data Table Number of additional skiers per day 122 skiers Average number of days per year that weather conditions allow skiing at Root Valley 151 days Useful life of expansion (in years) 11 years Average cash spent by each skier per day…
A local municipality is considering investing $220,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shownin the cash flow profhle given below in thousands of dollars. Notice, an intermediate investment of $140,000 is anticipated in the 6th year of the investment. Based on a MARR of 5%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places. (All values in thousand dollars) End-of Year Costs Benefits Net Cash Flow $220 -$220 $70 $120 $50 $70 $130 $60 $70 $140 $70 4 $70 $150 $80 $70 $160 $90 $210 $170 -$40 7. $70 $160 $90 1.45 2. in
The Bob's company is considering some new equipment for its bookstores. The project details are as follows: The upfront cost of $400,000 will last for 3 years. At the end of 3 years, Humber can sell the equipment for $200,000. The equipment will generate an extra $40,000 in revenue in the first year, $800,000 for year 2, and then increase by $15,000 for the next three years. Humber can borrow at 5%. Based on above calculate the project’s NPV IRR Profitability Index Payback Discounted Payback
A Corporation proposes to construct a new nuclear power plant to meet the increased demand for electricity. The plant will cost $2.2 billion to build. Cash flows provided by the plant will amount to $300 million per year for 15 years. At the end of year 15, the plant will be decommissioned. The cost of decommissioning is estimated to be $900 million. Calculate the project’s NPV if the discount rate is 5%.
A company wants to expand their manufacturing facilities . they have two choices ,first to expand the current site at a cost of $290,000 per year for two years to complete the expansion ,or to sell their current site for $1.3 million and purchase a new larger facility at a cost of $ 900,000 in the industrial zone. a) if the annual interest rate is 8%,evaluate the cash flows for the two options described above and decide which is the most financially beneficial to the corporation? b) if the company wants to factor inflation in their calculations,what is the equivalent nominal interest rate if expected inflation rate is 4% in the coming years? critically discuss the significance of including the factor of inflation in corporate finance calculations .
You are working on a bid to build 4 city parks a year for the next three years. This project requires the purchase of $1,000,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the three-year project life. The equipment can be sold at the end of the project for $12500. You will also need to invest $18,000 in net working capital for the duration of the project. The fixed costs will be $37,000 a year and the variable costs will be $148,000 per park. Your required rate of return is 14 percent and your tax rate is 21 percent. Make sure your work includes the answers to the following questions. What is the depreciation every year? What is the after-tax salvage value of the equipment at the end of the project? What is the change in net working capital at the beginning and the end of the project? What is the cash flow from assets (CFFA) at each time point? What is the estimated operating cash flow (OCF) the project must generate to make NPV…