Question

Question 2 --/15 View Policies Current Attempt in Progress Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $152,835 and have an estimated useful life of 6 years. It can be sold for $63,100 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 $26,000. 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 0 decimal places, e.g. 125.) Net present value $ The project is acceptable :

Answer 1

a)	Net Present Value - Project
	Discount Rate		10%
	Year	Particular	Cashflow	Discounting Factor @6%	Discounted Cash Flow
	a	b	c	d	e=d*c
	0	Exhibition Cost	$ -1,52,835	1.000	$                 -1,52,835.00
	1	Annual Cash Inflows	$       26,000	0.909	$                       23,636.36
	2	Annual Cash Inflows	$       26,000	0.826	$                       21,487.60
	3	Annual Cash Inflows	$       26,000	0.751	$                       19,534.18
	4	Annual Cash Inflows	$       26,000	0.683	$                       17,758.35
	5	Annual Cash Inflows	$       26,000	0.621	$                       16,143.95
	6	Annual Cash Inflows	$       26,000	0.564	$                       14,676.32
	6	Sale Value	$       63,100	0.564	$                       35,618.30
		NPV			$                       -3,979.92
	Therefore Net Present Value Of Project		$        -3,980
b)	The Project is NOT ACCEPTABLE

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