CFIN -STUDENT EDITION-ACCESS >CUSTOM<
6th Edition
ISBN: 9780357752951
Author: BESLEY
Publisher: CENGAGE C
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Chapter 9, Problem 6PROB
Summary Introduction
IRR of a project is calculated using a financial calculator. All financial calculators have an inbuild cash flow register, Cash flows in accordance of the timeline and with proper +/- signs should be input, then press the key labelled “IRR”. It will return the internal rate of return of the project.
A project has initial cost of $74,000 and is expected to generate $16,500 for the next six years.
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Question 1 (6 marks)
King’s Park, Trinidad is owned and operated by a private company,
Windy Sports Ltd. You work as the Facilities Manager of the Park and
the CEO of the company has asked you to evaluate whether Windy should
embark on the expansion of the facility given there are plans by the
Government to host next cricket championship.
The project seeks to increase the number of seats by building four
new box seating areas for VIPs and an additional 5,000 seats for the
general public. Each box seating area is expected to generate $400,000
in incremental annual revenue, while each of the new seats for the
general public will generate $2,500 in incremental annual revenue.
The incremental expenses associated with the new boxes and seating
will amount to 60 percent of the revenues. These expenses include
hiring additional personnel to handle concessions, ushering, and
security. The new construction will cost $15 million and will be fully
depreciated (to a value of zero dollars) on a…
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