Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Golden Opportunities, a not-for-profit community association, is consideringthe proposed acquisition of a new training and education software system. The price of the software system is

Golden Opportunities, a not-for-profit community association, is consideringthe proposed acquisition of a new training and education software system. The price of the software system is $500,000, and it has a life expectancy of 7 years. The system will be sold at the end of the life span, with salvage value of $175,000. While this new system will have no impact on the number of training sessions or reimbursement, it is however expected to save the association $5,000 per year in operating costs. On average, the instructors train 25 people per day for 235 days per year. Training materials cost approximately $15 per person. Grant funding provides reimbursement of $80 for each training session (per person registered). Year one expenses include instructor labor ($75,000), building operations (rent and utilities of $40,000 and $20,000 respectively), and overhead of $5,000. Costs increase by 5% annually. Revenues increase by 7% annually. The cost of capital is 10%. Calculate the net cash flows and the NPV.

Step by Step Solution

3.53 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

Year 0 1 2 3 Savings in operating costs 5000 5000 5000 Reimbursement of training expenses 300000 ... 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

Step: 3

blur-text-image

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

Corporate Finance A Focused Approach

Authors: Michael C. Ehrhardt, Eugene F. Brigham

4th Edition

1439078084, 978-1439078082

More Books

Students also viewed these Economics questions