Question

unting Sales Coolplay Corp. is thinking about opening a soccer camp in southern California. To start the camp, Coolplay would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year, the camp would be run for 8 sessions of 1 week each. The company would hire college Soccer players as coaches. The camp attendees would be male and female soccer players ages 12-18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Coolplay can sell the property for more than it was originally purchased for. The following amounts have been estimated. Support Cost of land Cost to build soccer fields, dorm and dining facility Annual cash inflows assuming 150 players and 8 weeks Annual cash outflows Estimated useful life Salvage value Discount rate $321,000 $642,000 $984,400 $898.800 20 years $1,605,000 Click here to view the factor table

Answer 1

Answers calculation of Web present value (NPU).'- $321,000 + $ 642,000 Initicu cast of investment = = $963,000 $984,400 - $ 898,800 Net annual cash in flows = - = $ 85,600 salvage value = $160.5,000 present value present Value of cashin flows i 7 1 + $1605,000 x Present of annula value factor @ 8.1 for 20ycan / factor@ 8.4 for 20th year) eur Pelue B XC60 Cashinde = ($85,600 x 9.8181) + ($ 1605.000 X 0.2145) = $ļ184,701.86 Ininal cost of investment Net present Value - (NPU) Present Value of cashin flows = $1184, 701.86 - $963,000 $221,701.86 The project should be accepted because of the positive = NPU