The Oklahoma City Zoo has proposed adding to their Web site a major segment providing a virtual tour of the grounds and animals,suitable for both routine enjoyment and educational purposes in classrooms. Survey data indicate that this will have either a neutralor positive effect upon actual zoo attendance. The Web site will be professionally done and have an initial cost of 5325,000. Upkeep,refreshing the videos, and developing videos for scientific research and entertainment will cost another 580,000 per year. The zoo isexpected to be in operation for an indefinite period; however, a study period of only 10 years for the Web site is to be assumed, withonly a residual (salvage) value of 560,000 for the archival value being anticipated. Interest is 7%. An estimated 100,000 persons willvisit the e-zoo in the first year, increasing by 30,000 each year, and they will receive, on the average, an additional 50.80 of benefit pervisit when the new area is complete. On the basis of benefit-cost analysis, should the Web site be supported for funding?A) YesB) No

Benefit-Cost Ratio=Present Worth of BenefitsPresent Worth of Costs

The Oklahoma City Zoo has proposed adding to their Web site a major segment providing a virtual tour of the grounds and animals, suitable for both routine enjoyment and educational purposes in classrooms. Survey data indicate that this will have either a neutral or positive effect upon actual zo0 attendance. The Web site will be professionally done and have an initial cost of 5325,000. Upkeep, refreshing the videos, and developing videos for scientific research and entertainment will cost another $80,000 per year. The zoo is expected to be in operation for an indefinite period; however, a study period of only 10 years for the Web site is to be assumed, with only a residual (salvage) value of 560,000 for the archival value being anticipated. Interest is 7%. An estimated 100,000 persons will visit the e-zoo in the first year, increasing by 30,000 each year, and they will receive, on the average, an additional S0.80 of benefit per visit when the new area is complete. On the basis of benefit-cost analysis, should the Web site be supported for funding? A) Yes B) No

The Oklahoma City Zoo has proposed adding to their Web site a major segment providing a virtual tour of the grounds and animals, suitable for both routine enjoyment and educational purposes in classrooms. Survey data indicate that this will have either a neutral or positive effect upon actual zo0 attendance. The Web site will be professionally done and have an initial cost of 5325,000. Upkeep, refreshing the videos, and developing videos for scientific research and entertainment will cost another $80,000 per year. The zoo is expected to be in operation for an indefinite period; however, a study period of only 10 years for the Web site is to be assumed, with only a residual (salvage) value of 560,000 for the archival value being anticipated. Interest is 7%. An estimated 100,000 persons will visit the e-zoo in the first year, increasing by 30,000 each year, and they will receive, on the average, an additional S0.80 of benefit per visit when the new area is complete. On the basis of benefit-cost analysis, should the Web site be supported for funding? A) Yes B) No

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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AMT, Inc., is considering the purchase of a digital camera for the maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineer. The capital investment requirement is P345,000 and the estimated market value of the system after a six-year study period is P115,000. Annual revenues attributable to the new camera system will be P120,000, whereas additional annual expenses will be P20,000. The corporation's MARR is 20% per year. Show whether this is a desirable investment by using the discounted payback method.
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