My first Magazine ACC 206 All Assignments | Page 48

a. Should the landfill be acquired if Bedford desires an 8% return on
its investment? Use the net-present-value method to determine your
answer.
Chapter 8 Problem 1:
1. Straightforward net-present-value and payback computations
STL Entertainment is considering the acquisition of a sight-seeing boat
for summer tours along the Mississippi River. The following information
is available:
Cost of boat
$500,000
Service life
10 summer seasons
Disposal value at the end of 10 seasons
$100,000
Capacity per trip
300 passengers
Fixed operating costs per season (including straight-line depreciation)
$160,000
Variable operating costs per trip