Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A Coolplay Corp. is thinking about opening a soccer camp in southern California. To start the camp, Coolplay would need to purchase land and build

image text in transcribed
A Coolplay Corp. is thinking about opening a soccer camp in southern California. To start the camp, Coolplay would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year the camp would be coaches. The camp attendees would be male and female soccer players age 12 -18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Coolplay can sell the property for more than it was originally purchased for. The following amounts have been estimated. Instructions Calculate the net present value of the project. To gauge the sensitivity of the project to these estimates, assume that if only 125 players attend each week, annual cash inflows will be $805,000 and annual cash outflows will be $750,000. What is the net present value using these alternative estimates? Discuss your findings. Assuming the original facts, what is the net present value if the project is actually riskier than first assumed and an 10% discount rate is more appropriate? Assume that during the first 5 years, the annual net cash flows each year were only $40,000. At the end of the fifth year, the company is running low on cash, so management decides to sell the property for $1, 332,000. What was the actual internal rate of return on the project? Explain how this return was possible given that the camp did not appear to be successful

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Process Driven Comprehensive Auditing A New Way To Conduct ISO 9001 2000 Internal Audits

Authors: Paul C. Palmes

1st Edition

0873896416, 978-0873896412

More Books

Students also viewed these Accounting questions

Question

Define Scientific Management

Answered: 1 week ago

Question

Explain budgetary Control

Answered: 1 week ago

Question

Solve the integral:

Answered: 1 week ago

Question

What is meant by Non-programmed decision?

Answered: 1 week ago

Question

Make efficient use of your practice time?

Answered: 1 week ago