The Charles Barkley Fitness Club is looking to expand its current facility by adding space for more weights, ardio equipment, and a made-to-order donut bar. The expansion and equipment investments will cost $ 100,000 initially and have a useful life of 15 years and a salvage value of $15,000. The additional area will ttract 500 customers a year, paying $20 a month, but will cost an additional $20,000 annually to maintain. Due to Barkleys credit, the cost of capital is only 6%. Charles Barkley is in the 35% tax bracket. Is this a wise vestment? Show all work to illustrate your answer.
The Charles Barkley Fitness Club is looking to expand its current facility by adding space for more weights, ardio equipment, and a made-to-order donut bar. The expansion and equipment investments will cost $ 100,000 initially and have a useful life of 15 years and a salvage value of $15,000. The additional area will ttract 500 customers a year, paying $20 a month, but will cost an additional $20,000 annually to maintain. Due to Barkleys credit, the cost of capital is only 6%. Charles Barkley is in the 35% tax bracket. Is this a wise vestment? Show all work to illustrate your answer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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