Problemmagic corporation an amusement park is considering a, Ask an Expert

Accounting

Problem:

Magic Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $136,000 and have an estimated useful life of 5 years. It will be sold for $65,000 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $25,000. The company's borrowing rate is 8%. Its cost of capital is 10%.

Required:

Calculate the net present value of this project to the company.

Note: Explain all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164330

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