A scuba diving school has been given the opportunity to purchase a sunken shipwreck for just $10,000, giving trainee scuba divers the opportunity to navigate through the ship as part of their training.  They are now considering a project to set up a new training course built around access to the ship.  If the course is unlikely to be profitable, the sunken ship can be sold to another scuba diving school that is interested in acquiring it. How would you treat the cost of the ship for the purposes of the NPV analysis for the new training course? Question 1Answer a. There is a sunk cost to the value of $10,000. b. There is a negative externality to the value of $10,000. c. There is a positive externality to the value of $10,000. d. There is an opportunity cost to the value of $10,000.

Please refer to the attached scenario Which costs are relevant to Brad’s decision to purchase a new, larger boat?

Abe Simpson’s Historical Aircraft, Inc. (ASHAI) is considering adding a rare World War II B-24 bomber to its collection of vintage aircraft.  The plane was forced down in Burma 1942, and it has remained there ever since.  Flying a crew to Burma and collecting the wreckage will cost $100,000.  Transporting the parts to the company’s restoration facility in Springfield will cost another $35,000.  Restoring the plane to flyable condition will cost an additional $600,000 at t0.   ASHAI’s operating costs will increase by $40,000 a year at the end of years 1 through 7.  At the end of years 3 through 7, revenues from exhibiting the plane at airshows will be $70,000.  At the end of year 7, the plane will be retired.  At that time the plane will be sold to a museum for $500,000.   The plane falls into the 7 year MACRS depreciation schedule.  ASHAI’s tax rate is 35% and the company’s required return on the project is 12%.  Calculate the NPV and IRR of the proposed investment in the plane.

You have been hired as a consultant for Pristine Urban-Tech Zither, Incorporated (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $740,000 in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $950,000 on an aftertax basis. In four years, the land could be sold for $1,225,000 after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $130,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 7,120, 7,920, 9,215, and 6,110 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium…

Please refer to the attached scenario Identify any unavoidable costs associated with the operation of Fishing Unlimited.

Please see image for question.

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial outlay of $240.20 million, and the expected cash inflows would be $80 million per year for 5 years. If the firm does Invest in mitigation, the annual inflows would be $84.06 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not…

In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that Manhattan Island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 4.25% annual interest rate, what is its value as of 2018 (392 years later)

Sharkey’s Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside the building. Paul Sharkey, the owner, would like to construct a water slide on one portion of his property. Mr. Sharkey gathered the following information about the slide:   Water slide equipment could be purchased and installed at a cost of $345,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. Mr. Sharkey would use straight-line depreciation on the slide equipment. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated, but they could be sold for $117,500 to an amusement park in a nearby city. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. The admission price would be $3.80 per person (the same price the Fun Center has been charging for the old rides). Based on…

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some alr pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial outlay of $210.55 million, and the expected cash Inflows would be $70 million per year for 5 years. If the firm does Invest in mitigation, the annual inflows would be $75.20 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not…