### Project Evaluation for Thunder Corporation **Scenario Overview:** Thunder Corporation, an amusement park, is evaluating a capital investment in a new exhibit. This financial decision involves assessing the viability and potential profitability of the project. **Project Details:** - **Initial Cost:** $163,796 - **Estimated Useful Life:** 6 years - **End-of-Life Value:** The exhibit can be sold for $62,300 after 6 years. - **Annual Cash Flow Increase:** $28,600 **Financial Rates:** - **Borrowing Rate:** 8% - **Cost of Capital:** 10% **Objective:** Calculate the **net present value (NPV)** of the project to determine its financial acceptability. **Instructions:** 1. **View the Factor Table:** Use the link provided in the document to access the factor table for precise calculations. 2. **NPV Calculation:** - Enter the calculated NPV value. - Determine if the project should be accepted based on the calculated NPV. - Use negative signs or parentheses for negative values (e.g., -45 or (45)). - Round your answer to 0 decimal places, using 5 decimal places in calculations as shown in the factor table. The outcome will guide decision-makers on whether or not to proceed with the investment, ensuring financial prudence and strategic alignment with company goals.
### Project Evaluation for Thunder Corporation **Scenario Overview:** Thunder Corporation, an amusement park, is evaluating a capital investment in a new exhibit. This financial decision involves assessing the viability and potential profitability of the project. **Project Details:** - **Initial Cost:** $163,796 - **Estimated Useful Life:** 6 years - **End-of-Life Value:** The exhibit can be sold for $62,300 after 6 years. - **Annual Cash Flow Increase:** $28,600 **Financial Rates:** - **Borrowing Rate:** 8% - **Cost of Capital:** 10% **Objective:** Calculate the **net present value (NPV)** of the project to determine its financial acceptability. **Instructions:** 1. **View the Factor Table:** Use the link provided in the document to access the factor table for precise calculations. 2. **NPV Calculation:** - Enter the calculated NPV value. - Determine if the project should be accepted based on the calculated NPV. - Use negative signs or parentheses for negative values (e.g., -45 or (45)). - Round your answer to 0 decimal places, using 5 decimal places in calculations as shown in the factor table. The outcome will guide decision-makers on whether or not to proceed with the investment, ensuring financial prudence and strategic alignment with company goals.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Project Evaluation for Thunder Corporation
**Scenario Overview:**
Thunder Corporation, an amusement park, is evaluating a capital investment in a new exhibit. This financial decision involves assessing the viability and potential profitability of the project.
**Project Details:**
- **Initial Cost:** $163,796
- **Estimated Useful Life:** 6 years
- **End-of-Life Value:** The exhibit can be sold for $62,300 after 6 years.
- **Annual Cash Flow Increase:** $28,600
**Financial Rates:**
- **Borrowing Rate:** 8%
- **Cost of Capital:** 10%
**Objective:**
Calculate the **net present value (NPV)** of the project to determine its financial acceptability.
**Instructions:**
1. **View the Factor Table:** Use the link provided in the document to access the factor table for precise calculations.
2. **NPV Calculation:**
- Enter the calculated NPV value.
- Determine if the project should be accepted based on the calculated NPV.
- Use negative signs or parentheses for negative values (e.g., -45 or (45)).
- Round your answer to 0 decimal places, using 5 decimal places in calculations as shown in the factor table.
The outcome will guide decision-makers on whether or not to proceed with the investment, ensuring financial prudence and strategic alignment with company goals.
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