Atlantic Amusements is in the process of reviewing proposals for new rides at its theme parks in cities scattered throughout the Atlantic coast. The company’s only experienced safety engineer must carefully review plans and monitor construction on each and every project- this constraint makes it impossible to build all of the new rides this year. The net present values and the amount of safety engineer time required for the proposed rides are listed below:
Safety Engineer | ||
Time Required | ||
Proposed Ride | Net Present Value | (hours) |
Ride 1 . | $741,400 | 220 |
Ride 2 . | 382,500 | 150 |
Ride 3 . | 850,500 | 350 |
Ride 4 . | 450,500 | 170 |
Ride5 . | 620,400 | 220 |
Ride 6 . | 1,004,400 | 310 |
Ride 7 . | 953,800 | 380 |
Ride 8 . | 332,500 | 190 |
Ride 9 . | 385,500 | 150 |
Ride 10 . | 680,400 | 270 |
Total | $6,401,900 | 2.41 |
Required:
1. The safety engineer is available to work on new rides for 1.220 hour, during the year. Which of the proposed rides should the company build this year) (Note: The incremental profit of a long-term project such as constructing a new ride is its net present value.)
2. What would be the total net present value of the rides built under your plan?
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