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MBA, Ph.D in Management
Harvard university
Feb-1997 - Aug-2003
Professor
Strayer University
Jan-2007 - Present
Wonder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $172,897 and have an estimated useful life of 9 years. It will be sold for $70,700 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $25,200. The company’s borrowing rate is 8%. Its cost of capital is 10%. (Refer the below table).
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Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value to 0 decimal places, e.g. 125. Round Discount Factor to 5 decimal places, e.g. 0.17986.)
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