Crane Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibitwould cost $167,270 and have an estimated useful life of 7 years. It can be sold for $69, 200 at the end ofthat time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increasenet annual cash flows by $26,300. The company's borrowing rate is 8%. Its cost of capital is 10%. Clickhere to view the factor table. Calculate the net present value of this project to the company and determinewhether the project is acceptable. (If the net present value is negative, use either a negative sign precedingthe number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed inthe factor table provided. Round present value answer to 0 decimal places, e.g. 125.) Net present value $Crane Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $167,270 and havean estimated useful life of 7 years. It can be sold for $69,200 at the end of that time. (Amusement parks need to rotate exhibits to keeppeople interested.) It is expected to increase annual cash flows by $26,300. The company's borrowing rate is 8%. Its cost of capitalis 10%. Click here to view the factor table.Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net presentvalue 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. $

A financial metric called net present value (NPV) is used to assess the profitability of a project…

Crane Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $167,270 and have an estimated useful life of 7 years. It can be sold for $69, 200 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 $26,300. The company's borrowing rate is 8%. Its cost of capital is 10%. Click

Crane Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $167,270 and have an estimated useful life of 7 years. It can be sold for $69, 200 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 $26,300. The company's borrowing rate is 8%. Its cost of capital is 10%. Click

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? SITTE a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)
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XYZ, which currently sells art products, is considering project Q, which would involve teaching art lessons For most of its existence, XYZ sold art products, taught art lessons, and painted murals Project Q Would require an initial investment of $87,300 today and is expected to produce annual cash flows of $10,200 each year forever with the first annual cash flow expected in 1 year What is the NPV of project Q. based on the information in this paragraph and the following table and applying the pure play approach to detemining a project's cost of capital? Firm XYZ Frisco Frescos NorCal Art Art Factory Line of business Sells art products Paints murals at residential and commercial sights Teaches art lessons Sells art products, teaches art lessons, & paints murals WACC 144 percent 82 percent 95 percent 77 percent O a. $20,068 (plus or minus $10) Ob. $144,518 (plus or minus $10) OC. $37,090 (plus or minus $10) O d. $45,168 (plus or minus $10) O e. None of the above is within $10 of the…
Abbondante Multinational Inc. has to decide between a gas powered and an electric - powered forklift. The company will buy only one forklift. The gas - powered forklift costs $17,600 and has cash flows of $5,700 per year for 8 years. The electric - powered forklift will cost $ 22,100 and has cash flows of $5,900 per year for 6 years. The cost of capital is 9.57%. Calculate the NPV and the IRR for each forklift. Which one should the company select? Why? Calculate the profitability index for both. Which one should the company select? Why?
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Courses/88945/quizzes/289708/take Van Nuys Company Year Cash Flow Cost of Capital 12% %24 (7,370) 24 1 4,000 (2,000) 24 24 4,000 (2,000) 24 4,000 24 (2,000) $4 4,000 24 (2,000) 5 $4 4,000 (2,000) 24 24 6. 4,000 24 (2,000)
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and will operate for 20 years. Open Seas expects annual cash flows from operating the ship to be $70.5 million and its cost of capital is 12.2%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)