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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.
The fact that risk and uncertainty are experienced differently might matter in times of financial crisis. What are the key differences between risk and uncertainty? Discuss.
Of the 4 cash flow reporting methods provided, which method is used in the following scenario? Scenario: Assumptions • Item: The proposal is for the purchase of a new MRI machine • Cost: The machine costs $1,500,000.
The taxes payable account increased from the beginning of the accounting period to the end of the accounting period. This impacts cash flow through a
At what rate is the top surface of the water rising when its height above the bottom of the bowl is 3 feet? 4 feet? 5 feet?
Dr. Molar, a dentist, is interested in making a deposit into a SEP plan. The Doctor has $25,000 he wants to save for his retirement. Currently, he has an income of $196,000 per year. He also has 3 employees; 2 hygienists and an office manager. They m..
The Z-90 project being considered by Steppingstone Inc. (SI) has an up-front cost of $250,000. The project's subsequent cash flows are critically dependent on whether another of its products, Z-45, becomes an industry standard. what is the Z-90's exp..
What do you think the primary motive of issuing debt rather than equity and why would they issue debt while the cash balances are at record levels?
A foundry uses 3,600 tons of pig iron per year at a constant rate. The cost per ton delivered to the foundry is $145. It costs $92 to place an order and $18 per ton per year for storage. Find the minimum-cost purchase quantity.
The principal use of an article refers to: a. the purpose for which it is to be imported. b. the use that is greater than any other single use of the article. c. the use of the components once they are fully assembled. d. any one of the above.
You will receive a $100,000 inheritance in 20 years. Your investments earn 6% per year, compounded annually. To the nearest hundred dollars, what is the present value of your inheritance?
Wayne State offers a tuition financing plan where a $40,000 loan taken at the beginning of the freshman year would pay for all 4 years of college tuition. The plan calls for the loan to be repaid over a ten year period starting 5 years from the date ..
3 year(s) ago, Mack invested 5,060 dollars. In 2 year(s) from today, he expects to have 8,990 dollars. If Mack expects to earn the same annual return after 2 year from today as the annual rate implied from the past and expected values given in the pr..
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