My first Magazine ACC 206 All Assignments | Page 49

$1,000
Ticket price
$5 per passenger
All operating costs, except depreciation, require cash outlays. On the
basis of similar operations in other parts of the country, management
anticipates that each trip will be sold out and that 120,000 passengers
will be carried each season. Ignore income taxes.
Instructions:
By using the net-present-value method, determine whether STL
Entertainment should acquire the boat. Assume a 14% desired return
on all investments,- round calculations to the nearest dollar.
Chapter 8 Problem 4:
4. Equipment replacement decision
Columbia Enterprises is studying the replacement of some equipment
that originally cost $74,000. The equipment is expected to provide six
more years of service if $8,700 of major repairs are performed in two
years. Annual cash operating costs total $27,200. Columbia can sell the
equipment now for $36,000; the estimated residual value in six years is
$5,000.