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Author Question: Brian Lochte operates a popular water park. Projections for the current year are as follows:Sales ... (Read 4 times)

903f23fj0

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on: Feb 5, 2023
Brian Lochte operates a popular water park. Projections for the current year are as follows:

Sales revenue$8,000,000
Operating income 700,000
Average total assets4,000,000

The park's weighted-average cost of capital is 10%, and Brian requires that all new investments generate a return on investment of at least 13%. At last week's board meeting, Brian told the board that he had up to $50,000 to invest in new facilities at the Park and asked them to recommend some projects. Today the board's president presented Brian with the following list of three potential investments to improve the park facilities.

Wading PoolDiving PoolHot Tub
Incremental operating income$  3,250$  4,800$  2,700
Average total assets  25,000  45,000  16,000

Required:

a.Calculate the residual income and economic value added for each of the three
projects.
b.Which of the three projects do you recommend Brian undertake? Why?
Managerial Accounting ¦ Davis ¦ 4th Edition
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Marked as best answer by 903f23fj0 on Feb 5, 2023

hvhf4k+549qz8f218jyo@shar

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Reply #1 on: Feb 5, 2023
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903f23fj0

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Reply 2 on: Feb 5, 2023
YES! Correct, THANKS for helping me on my review

momolu

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Reply 3 on: Yesterday
Wow, this really help

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