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12 Net Present Value Analysis You have an opportunity to invest in a concession at a world exposition. To use the building and exhibits more

12 Net Present Value Analysis You have an opportunity to invest in a concession at a world exposition. To use the building and exhibits more fully, the venture is expected to cover a six-year period consisting of a preliminary year, the two years of formal exposition, and a three-year period of reduced operation as a regional exposition. The terms of the concession agreement specify the following:

1. At inception, a $60,000 deposit is paid to Global Expo, Inc., the promoting organization. This amount is returned in full at the end of the six years if the operator maintains the concession in order and keeps it open during scheduled hours. The deposit is not tax deductible, nor is its return subject to income taxes.

2. The operator must install certain fixtures that will cost $240,000. The fixtures become the property of Global Expo, Inc., at the end of the six years.

After careful investigation and consultation with local experts, you conclude that the following schedule reflects the estimated pre-tax income of the concession (amounts in thousands of dollars):

dollars):

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Sales (all cash)

$150

$435

$488

$300

$240

$180

Operating expenses

Cash

75

228

279

170

140

106

Tax depreciation

48

77

46

28

28

13

Total expenses

123

305

325

198

168

119

Pre-tax income

27

130

163

102

72

61

Assuming an income tax rate of 40% and a desired annual return of 9%, what is the net present value of this investment opportunity?

Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers.

Enter answers below using complete numbers. Do not enter answers in thousands as shown above in the exhibit. For example, Year 1 Sales figure above shows as $150. The number would be entered below as $150,000.

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Cash sales

$Answer

$Answer

$Answer

$Answer

$Answer

$Answer

Operating expenses

Answer

Answer

Answer

Answer

Answer

Answer

Income taxes

Answer

Answer

Answer

Answer

Answer

Answer

Total cash outflows

Answer

Answer

Answer

Answer

Answer

Answer

After-tax cash inflows

$Answer

$Answer

$Answer

$Answer

$Answer

$Answer

Present value

$Answer

$Answer

$Answer

$Answer

$Answer

$Answer

Present value of net after-tax operating cash inflows

$Answer

Return of deposit in 6 years

Answer

Total present value of future cash flows

$Answer

Investment required

Answer

Net positive (negative) present value

$Answer

What is the maximum amount that could be invested and still earning a 9% annual return?

$Answer

Please show your work so I can see how you arrived at the answer. Thank you.

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