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Can you please help me with a problem on straightforwardnetpresentvalueandpaybackcomputations? I put the chart/table where solutions go in attachment 3B. Straightforward net present value and
Can you please help me with a problem on straightforwardnetpresentvalueandpaybackcomputations? I put the chart/table where solutions go in attachment 3B.
Straightforward net present value and payback computations The Calgary Eskimos play in the Canadian Hockey League. Although the Eskimos will soon be moving to a modern arena, management is studying the possibility of expanding the team's present facility to accommodate increased crowds. A $2.4 million expansion is planned that has a $200,000 residual value and will be depreciated by the straight-line method over four seasons. Information about the expansion follows: Number of seats Occupancy rate Ticket Price Class 1 seats 2500 80% $6 Class 2 seats 2000 60 4 4 The team will play 56 home games each season. Total added operating costs per game (ushers, cleanup, and depreciation) are expected to average $11,800. All such costs, except depreciation, require cash outlays. Instructions a By using the net present value method and a 16% desired rate of return, determine whether the expansion should be undertaken. b In addition to the cash flows presented here, what other cash flows might change if the Eskimos add on to the arena? Revenue per year-class 1 Revenue per year-class 2 Total revenue Total yearly expenses (Added extra costs per game minus depreciation) X (# of games) Cash flow year 1(Inflows- expenses) Cash flow year 2 Cash flow year 3 Cash flow year 4 Net Present value Present value of residual: Year 1 Year 2 Year 3 Year 4 NPV Total Present value Calculation: NPV Cash Inflows NPV of residual: Cost of Arena Total Net Present Value In addition to the cash flows presented here, what other cash flows might change if the Eskimos add on to the arenaStep by Step Solution
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