Blossom Corp. is thinking about opening a soccer camp in southern California. To start the camp, Blossom would need to purchaseland and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year, the camp would be run for 8sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and femalesoccer players ages 12-18. Property values in southern California have enjoyed a steady increase in value. It is expected that afterusing the facility for 20 years, Blossom can sell the property for more than it was originally purchased for. The following amounts havebeen estimated.Cost of land$303,000Cost to build soccer fields, dorm, and dining facility$606,000Annual cash inflows assuming 150 players and 8 weeks$929,200Annual cash outflows$848,400Estimated useful life20 yearsSalvage value$1,515,000Discount rate8%Click here to view PV table.SL

Answers: Initial Investment:Cost of land = $303,000Cost to build soccer fields, dorm, and dining…

Answered: Blossom Corp. is thinking about opening…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5EA: If a garden center is considering the purchase of a new tractor with an initial investment cost of...

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Pharoah Corp. is thinking about opening a soccer camp in southern California. To start the camp, Pharoah 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, Pharoah can sell the property for more than it was originally purchased for. The following amounts have been estimated. 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 Click here to view the factor table. (a) Net present value $ $318,000 $636,000 $975,200 $890,400 Should the project be accepted?…
a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,450,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $230,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. Should the company buy the new welding system? Yes 2. Conceptual Connection: Assuming a…
Linksys is considering the development of a wireless home networking appliance, called HomeNet, that will provide both the hardware and the software necessary to run an entire home from any Internet connection. HomeNet's lab will be housed in warehouse space that the company could have otherwise rented out for $190,000 per year during years 1 through 4. The tax rate for Linksys is 20%. How does this opportunity cost affect HomeNet's incremental earnings? HomeNet will experience in incremental earnings of $ per year for the 4 years. (Select from the drop-down menu and round to the nearest dollar.)
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You are trying to evaluate the feasibility of purchasing a quarter-acre plot (approximately 11,000 square feet) of agricultural land that has proper drainage and access to paved roads. You plan to rent the plot of land to receive after-tax receipts of US$2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four (two-bedroom) apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%. 1.Showing all calculations state if you should purchase the land for $1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?
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Your neighborhood laundromat is for sale and a friend is considering investing in this business. Your friend has asked for your financial advice regarding this endeavor. For the business alone and no other assets (such as the building and land), the purchase price is $250,000. The net cash flows for the project are $30,000 per year for the next 5 years. The plan is to borrow the money for this investment at 6%. You will need to submit a presentation sharing your recommendation and you must address the following questions:Part A: Calculate the Net Present Value and Payback Period: What is the net present value of this project? Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project? Use the following template to complete the Unit 4 Excel spreadsheet (IP): Unit 4 IP Assignment Template Part B: Evaluate the investment and provide calculations for an alternative deal: How would you evaluate this…
Happy Trails Senior Living Community is considering investing in solar panels to save on utility costs. The initial cost of the panels, including installation, is $250,000. The expected reduction in utility costs are noted below. Utility costs savings for the next five years are: Year 1: $65,000 Year 2: $68,250 Year 3: $71,663 Year 4: $75,246 Year 5: $79,008 The current interest rate used to evaluate investment decisions is 6%. The inflation rate is expected to remain constant at 3% for the entire period. Instructions (a) Compute the present value of the expected cash flows (savings). (b) Should Happy Trails move forward with the investment?

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