Question

CALCULATOR FULL SCREEN PRINTER VERSION BACK NEX Brief Exercise 25-03 l your answer is partially correct. Try again. Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $163,796 and have an estimated useful life of 6 years. It can be sold for $62,300 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $28,600. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view the factor table. 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 either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor cable provided. Round present value answer to 0 decimal places, e.g. 125.) Net present value The project is not acceptable ac LINK TO TEXT

Answer 1

Initial Investment = $163,796
Useful Life = 6 years
Salvage Value = $62,300
Annual Net Cash Flow = $28,600
Cost of Capital = 10%

Net Present Value = -$163,796 + $28,600 * PVA of $1 (10%, 6) + $62,300 * PV of $1 (10%, 6)
Net Present Value = -$163,796 + $28,600 * 4.35526 + $62,300 * 0.56447
Net Present Value = -$4,069

The project is not acceptable.