ave an estimated useful life of 6 years. It can be sold for $62,300 at the end of that time. (Amusement parks need to rotate eep people interested.) It is expected to increase net annual cash flows by $28,600. The company's borrowing rate is 8%. apital is 10%. Click here to view the factor table. alculate the net present value of this project to the company and determine whether the project is acceptable. (If the net p negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal p isplayed in the factor table provided. Round present value answer to O decimal places, e.g. 125.) Net present value $ The project

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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**Thunder Corporation Investment Analysis**

Thunder Corporation, an amusement park, is considering investing in a new exhibit. The costs and financial details are as follows:

- **Initial Cost of Exhibit:** $163,796
- **Estimated Useful Life:** 6 years
- **Salvage Value at End of Useful Life:** $62,300

The park expects that the new exhibit will increase net annual cash flows by $28,600. 

**Financial Rates:**

- **Borrowing Rate:** 8%
- **Cost of Capital:** 10%

A factor table is available for calculating the present value factors. 

**Objective:**  
Calculate the net present value (NPV) to determine project viability. If the NPV is negative, indicate using either a negative sign preceding the number (e.g., -45) or parentheses (e.g., (45)). Calculations should be made using factors rounded to five decimal places. The final present value answer should be rounded to 0 decimal places (e.g., 125).

**Inputs Required:**

1. **Net Present Value (NPV):** 
   - Input field for NPV calculation result.

2. **Project Decision:**
   - Dropdown for selecting the project's approval status based on NPV.

This analysis will help decide whether the investment is viable and should be undertaken by Thunder Corporation.
Transcribed Image Text:**Thunder Corporation Investment Analysis** Thunder Corporation, an amusement park, is considering investing in a new exhibit. The costs and financial details are as follows: - **Initial Cost of Exhibit:** $163,796 - **Estimated Useful Life:** 6 years - **Salvage Value at End of Useful Life:** $62,300 The park expects that the new exhibit will increase net annual cash flows by $28,600. **Financial Rates:** - **Borrowing Rate:** 8% - **Cost of Capital:** 10% A factor table is available for calculating the present value factors. **Objective:** Calculate the net present value (NPV) to determine project viability. If the NPV is negative, indicate using either a negative sign preceding the number (e.g., -45) or parentheses (e.g., (45)). Calculations should be made using factors rounded to five decimal places. The final present value answer should be rounded to 0 decimal places (e.g., 125). **Inputs Required:** 1. **Net Present Value (NPV):** - Input field for NPV calculation result. 2. **Project Decision:** - Dropdown for selecting the project's approval status based on NPV. This analysis will help decide whether the investment is viable and should be undertaken by Thunder Corporation.
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