Question

Brief Exercise 24-3 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 $150,425 and have an estimated useful life of 9 years. It will be sold for $69,600 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $20,300. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view PV 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 table provided. Round present value answer to o decimal places, e.g. 125.) Net present value

Answer 1

Answer- Net present value = ($4000).

Explanation-Net present value = Present value of cash inflows – Total outflows

= ($20300*5.75902)+($69600*0.42410)-$150425

= $116908+$29517-$150425

= $146425-$150425

= ($4000)

The project is not acceptable due to negative net present value.