Author Question: Corky's Amusement Park is evaluating the purchase of a new game to be located on its Midway. Corky's ... (Read 101 times)

nelaaney

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Corky's Amusement Park is evaluating the purchase of a new game to be located on its Midway.  Corky's has narrowed their choices down to two:  the Wacky Water Race game and the Whack-A-Mole game.  Financial data about the two choices follows.

Wacky Water RaceWhack-A-Mole
Investment $32,000 $22,000
Useful life55
Estimated annual net
cash inflows for 8 years
$9,000 $5,000
Residual value $2,000 $1,000
Depreciation methodstraight-linestraight-line
Required rate of return8%10%


The total present value of future cash inflows from the Whack-A-Mole game is closest to
◦ $20,586.
◦ $41,576.
◦ $18,955.
◦ $19,576.



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Medesa

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  • Posts: 507
Corky's Amusement Park is evaluating the purchase of a new game to be located on its Midway.  Corky's has narrowed their choices down to two:  the Wacky Water Race game and the Whack-A-Mole game.  Financial data about the two choices follows.

Wacky Water RaceWhack-A-Mole
Investment $32,000 $22,000
Useful life55
Estimated annual net
cash inflows for 8 years
$9,000 $5,000
Residual value $2,000 $1,000
Depreciation methodstraight-linestraight-line
Required rate of return8%10%


The total present value of future cash inflows from the Wacky Water Race game is closest to
◦ $5,299.
◦ $35,481.
◦ $37,299.
◦ $19,576.




 

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