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The owners of Blossom de Trois-Rivières hockey club are considering a deal with an older, establ the services of Pierre Pharoah, a very high scorer and great gate attraction, in exchange for Ken annually). The established club would also receive $585,000 cash from Blossom. The owners' ac following data: Estimated useful life of Pharoah Estimated residual value of Pharoah Estimated useful life of Garcia Estimated residual value of Garcia Current cash offer for Garcia received from another club Applicable desired rate of return 5 years $23,400 5 years None $58,500 10%

The owners of Blossom de Trois-Rivières hockey club are considering a deal with an older, establ the services of Pierre Pharoah, a very high scorer and great gate attraction, in exchange for Ken annually). The established club would also receive $585,000 cash from Blossom. The owners' ac following data: Estimated useful life of Pharoah Estimated residual value of Pharoah Estimated useful life of Garcia Estimated residual value of Garcia Current cash offer for Garcia received from another club Applicable desired rate of return 5 years $23,400 5 years None $58,500 10%

FINANCIAL ACCOUNTING
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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The owners of Blossom de Trois-Rivières hockey club are considering a deal with an older, established club whereby they can acquire the services of Pierre Pharoah, a very high scorer and great gate attraction, in exchange for Kenneth Garcia (currently paid $17,550 annually). The established club would also receive $585,000 cash from Blossom. The owners' accountants have assembled the following data: Estimated useful life of Pharoah Estimated residual value of Pharoah Estimated useful life of Garcia Estimated residual value of Garcia Current cash offer for Garcia received from another club Applicable desired rate of return Other information: Year 1 2 3 4 5 Pharoah's Salary $70,200 81,900 93,600 93,600 84.240 Click here to view the factor table. The hockey club Additional Gate Receipts Because of Pharoah Net present value $ $386,100 351,000 234,000 117,000 46,800 5 years $23,400 5 years None $58,500 10% Additional Expenses of Handling Higher Volume $38,610 35,100 ✓acquire the services of Pharoah. 23,400 Based on your analysis of the data, calculate the net present value of Pharoah's services. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 11,700 Recommend whether or not the club should acquire the services of Pierre Pharoah. 4,680
Transcribed Image Text:The owners of Blossom de Trois-Rivières hockey club are considering a deal with an older, established club whereby they can acquire the services of Pierre Pharoah, a very high scorer and great gate attraction, in exchange for Kenneth Garcia (currently paid $17,550 annually). The established club would also receive $585,000 cash from Blossom. The owners' accountants have assembled the following data: Estimated useful life of Pharoah Estimated residual value of Pharoah Estimated useful life of Garcia Estimated residual value of Garcia Current cash offer for Garcia received from another club Applicable desired rate of return Other information: Year 1 2 3 4 5 Pharoah's Salary $70,200 81,900 93,600 93,600 84.240 Click here to view the factor table. The hockey club Additional Gate Receipts Because of Pharoah Net present value $ $386,100 351,000 234,000 117,000 46,800 5 years $23,400 5 years None $58,500 10% Additional Expenses of Handling Higher Volume $38,610 35,100 ✓acquire the services of Pharoah. 23,400 Based on your analysis of the data, calculate the net present value of Pharoah's services. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) 11,700 Recommend whether or not the club should acquire the services of Pierre Pharoah. 4,680
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