Homework Help is Here – Start Your Trial Now!
Business
Finance
(the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? O a) The do-nothing alternative will be selected. b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60

(the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? O a) The do-nothing alternative will be selected. b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
See similar textbooks
icon
Related questions
Question
Can some one please help me to answer each question correctly? please and thank you.
We plan to compare economically two design alternatives (A and B) for a new ride (the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? a) The do-nothing alternative will be selected. O b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60
Transcribed Image Text:We plan to compare economically two design alternatives (A and B) for a new ride (the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? a) The do-nothing alternative will be selected. O b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Money Management and Achieving Financial Goals
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
SEE MORE TEXTBOOKS