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Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost 228,365 and have an estimated useful life of 12 years. It will be sold for $63,000 at that time (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $30,000. The companys borrowing rate is 8%. Its cost of capital is 10%. be sold for $63,000 at that time. 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 table provided. Round present value answer to 0 decimal places, e.g. 125.) sig 125.) Net present value projects not acceptable.

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Cost of investment - S228,365 Estimated useful life - 12 Years Salvage value $63,000 Annual cash inflows -S30,000 Cost ofcapital-10% Net present value (NPV)Present value of cash inflows - Present value of cash outflows NPVAnnual cash inflows * PVIFA(I, n) +Salvage value * PVIFI,n) - Cost of investment $30,000 * PVIFA(10%, 12) + $63,000 * PVIF(10% , 12). S228365 - S30,000 * 6.8137 S63,000 * 0.3186 - S228,365 S3,882.2 Smce NPV is negative tis better to reject the project Ans: The project is not acceptable. Note : We should cost of capital rate only while computing net present value.

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