Question
HERO Sports Facilities is planning to construct a Futsal Sport Arena on which has 60 courts to be used at any point of time. The
HERO Sports Facilities is planning to construct a Futsal Sport Arena on which has 60 courts to be used at any point of time. The usage of the courts is expected to be 90% all time throughout the years. The initial investment cost for the sport arena is RM550,000. It is expected to generate revenue RM3,000 per court in year 1 and 10% increase for every year from year 2 to 6. The operating cost per court is RM1,000 and expected to increase by 10% every year from year 2 to 6. At year 6 it can cease the operation by selling the entire business for RM400,000. The cost of capital is expected to be about 12%. Advice whether the project is acceptable or rejected by using the below methods.
B. Payback Period Technique (PBP)
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