Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Oriole Corporation, which operates an amusement park, is considering a capital investment in a new ride. The ride would cost
$124,000 and have an estimated useful life of 5 years. The park will sell it for $68,800 at that time. (Amusement parks need to rotate
rides to keep people interested.) The ride will be expected to increase net annual cash flows by $21,200. The company's borrowing
rate is 8%. Its cost of capital is 10%.
Click here to view the factor table.
Calculate the net present value of this project to the company. (If the net present value is negative, use either a negative sign preceding the
number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124.
Round present value answer to O decimal places, e.g. 125.)
Net present value $
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Transcribed Image Text:Oriole Corporation, which operates an amusement park, is considering a capital investment in a new ride. The ride would cost $124,000 and have an estimated useful life of 5 years. The park will sell it for $68,800 at that time. (Amusement parks need to rotate rides to keep people interested.) The ride will be expected to increase net annual cash flows by $21,200. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view the factor table. Calculate the net present value of this project to the company. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. Round present value answer to O decimal places, e.g. 125.) Net present value $
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