Problem 25-05A a-c, d1

Bonita Corp. is thinking about opening a soccer camp in southern California. To start the camp, Bonita 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 run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 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, Bonita can sell the property for more than it was originally purchased for. The following amounts have been estimated.

Cost of land$318,000Cost to build soccer fields, dorm and dining facility$636,000Annual cash inflows assuming 150 players and 8 weeks$975,200Annual cash outflows$890,400Estimated useful life20 yearsSalvage value$1,590,000Discount rate8%

Click here to view PV table.

Calculate the net present value of the project.(If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125.For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value$

Should the project be accepted?

The project

should

should not

be accepted.

To gauge the sensitivity of the project to these estimates, assume that if only 125 players attend each week, annual cash inflows will be $853,300 and annual cash outflows will be $795,000.

What is the net present value using these alternative estimates?(If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125.For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value$

Should the project be accepted?

The project should be

rejected

accepted

.

Assuming the original facts, what is the net present value if the project is actually riskier than first assumed and a 10% discount rate is more appropriate?(If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125.For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value$

Should the project be accepted?

The project

should

should not

be accepted.

Assume that during the first 5 years, the annual net cash flows each year were only $42,400. At the end of the fifth year, the company is running low on cash, so management decides to sell the property for $1,411,920. What was the actual internal rate of return on the project?(Round answer to 0 decimal places, e.g. 13%.For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Actual internal rate of return

%

Table1Future Value of 1

(n)Periods

4%

5%

6%

7%

8%

9%

10%

11%

12%

15%

0

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

1

1.04000

1.05000

1.06000

1.07000

1.08000

1.09000

1.10000

1.11000

1.12000

1.15000

2

1.08160

1.10250

1.12360

1.14490

1.16640

1.18810

1.21000

1.23210

1.25440

1.32250

3

1.12486

1.15763

1.19102

1.22504

1.25971

1.29503

1.33100

1.36763

1.40493

1.52088

4

1.16986

1.21551

1.26248

1.31080

1.36049

1.41158

1.46410

1.51807

1.57352

1.74901

5

1.21665

1.27628

1.33823

1.40255

1.46933

1.53862

1.61051

1.68506

1.76234

2.01136

6

1.26532

1.34010

1.41852

1.50073

1.58687

1.67710

1.77156

1.87041

1.97382

2.31306

7

1.31593

1.40710

1.50363

1.60578

1.71382

1.82804

1.94872

2.07616

2.21068

2.66002

8

1.36857

1.47746

1.59385

1.71819

1.85093

1.99256

2.14359

2.30454

2.47596

3.05902

9

1.42331

1.55133

1.68948

1.83846

1.99900

2.17189

2.35795

2.55803

2.77308

3.51788

10

1.48024

1.62889

1.79085

1.96715

2.15892

2.36736

2.59374

2.83942

3.10585

4.04556

11

1.53945

1.71034

1.89830

2.10485

2.33164

2.58043

2.85312

3.15176

3.47855

4.65239

12

1.60103

1.79586

2.01220

2.25219

2.51817

2.81267

3.13843

3.49845

3.89598

5.35025

13

1.66507

1.88565

2.13293

2.40985

2.71962

3.06581

3.45227

3.88328

4.36349

6.15279

14

1.73168

1.97993

2.26090

2.57853

2.93719

3.34173

3.79750

4.31044

4.88711

7.07571

15

1.80094

2.07893

2.39656

2.75903

3.17217

3.64248

4.17725

4.78459

5.47357

8.13706

16

1.87298

2.18287

2.54035

2.95216

3.42594

3.97031

4.59497

5.31089

6.13039

9.35762

17

1.94790

2.29202

2.69277

3.15882

3.70002

4.32763

5.05447

5.89509

6.86604

10.76126

18

2.02582

2.40662

2.85434

3.37993

3.99602

4.71712

5.55992

6.54355

7.68997

12.37545

19

2.10685

2.52695

3.02560

3.61653

4.31570

5.14166

6.11591

7.26334

8.61276

14.23177

20

2.19112

2.65330

3.20714

3.86968

4.66096

5.60441

6.72750

8.06231

9.64629

16.36654

Table2Future Value of an Annuity of 1

(n)Payments

4%

5%

6%

7%

8%

9%

10%

11%

12%

15%

1

1.00000

1.00000

1.00000

1.0000

1.00000

1.00000

1.00000

1.00000

1.00000

1.00000

2

2.04000

2.05000

2.06000

2.0700

2.08000

2.09000

2.10000

2.11000

2.12000

2.15000

3

3.12160

3.15250

3.18360

3.2149

3.24640

3.27810

3.31000

3.34210

3.37440

3.47250

4

4.24646

4.31013

4.37462

4.4399

4.50611

4.57313

4.64100

4.70973

4.77933

4.99338

5

5.41632

5.52563

5.63709

5.7507

5.86660

5.98471

6.10510

6.22780

6.35285

6.74238

6

6.63298

6.80191

6.97532

7.1533

7.33592

7.52334

7.71561

7.91286

8.11519

8.75374

7

7.89829

8.14201

8.39384

8.6540

8.92280

9.20044

9.48717

9.78327

10.08901

11.06680

8

9.21423

9.54911

9.89747

10.2598

10.63663

11.02847

11.43589

11.85943

12.29969

13.72682

9

10.58280

11.02656

11.49132

11.9780

12.48756

13.02104

13.57948

14.16397

14.77566

16.78584

10

12.00611

12.57789

13.18079

13.8164

14.48656

15.19293

15.93743

16.72201

17.54874

20.30372

11

13.48635

14.20679

14.97164

15.7836

16.64549

17.56029

18.53117

19.56143

20.65458

24.34928

12

15.02581

15.91713

16.86994

17.8885

18.97713

20.14072

21.38428

22.71319

24.13313

29.00167

13

16.62684

17.71298

18.88214

20.1406

21.49530

22.95339

24.52271

26.21164

28.02911

34.35192

14

18.29191

19.59863

21.01507

22.5505

24.21492

26.01919

27.97498

30.09492

32.39260

40.50471

15

20.02359

21.57856

23.27597

25.1290

27.15211

29.36092

31.77248

34.40536

37.27972

47.58041

16

21.82453

23.65749

25.67253

27.8881

30.32428

33.00340

35.94973

39.18995

42.75328

55.71747

17

23.69751

25.84037

28.21288

30.8402

33.75023

36.97351

40.54470

44.50084

48.88367

65.07509

18

25.64541

28.13238

30.90565

33.9990

37.45024

41.30134

45.59917

50.39593

55.74972

75.83636

19

27.67123

30.53900

33.75999

37.3790

41.44626

46.01846

51.15909

56.93949

63.43968

88.21181

20

29.77808

33.06595

36.78559

40.9955

45.76196

51.16012

57.27500

64.20283

72.05244

102.44358

Table3Present Value of 1

(n)Periods

4%

5%

6%

7%

8%

9%

10%

11%

12%

15%

1

.96154

.95238

.94340

.93458

.92593

.91743

.90909

.90090

.89286

.86957

2

.92456

.90703

.89000

.87344

.85734

.84168

.82645

.81162

.79719

.75614

3

.88900

.86384

.83962

.81630

.79383

.77218

.75132

.73119

.71178

.65752

4

.85480

.82270

.79209

.76290

.73503

.70843

.68301

.65873

.63552

.57175

5

.82193

.78353

.74726

.71299

.68058

.64993

.62092

.59345

.56743

.49718

6

.79031

.74622

.70496

.66634

.63017

.59627

.56447

.53464

.50663

.43233

7

.75992

.71068

.66506

.62275

.58349

.54703

.51316

.48166

.45235

.37594

8

.73069

.67684

.62741

.58201

.54027

.50187

.46651

.43393

.40388

.32690

9

.70259

.64461

.59190

.54393

.50025

.46043

.42410

.39092

.36061

.28426

10

.67556

.61391

.55839

.50835

.46319

.42241

.38554

.35218

.32197

.24719

11

.64958

.58468

.52679

.47509

.42888

.38753

.35049

.31728

.28748

.21494

12

.62460

.55684

.49697

.44401

.39711

.35554

.31863

.28584

.25668

.18691

13

.60057

.53032

.46884

.41496

.36770

.32618

.28966

.25751

.22917

.16253

14

.57748

.50507

.44230

.38782

.34046

.29925

.26333

.23199

.20462

.14133

15

.55526

.48102

.41727

.36245

.31524

.27454

.23939

.20900

.18270

.12289

16

.53391

.45811

.39365

.33873

.29189

.25187

.21763

.18829

.16312

.10687

17

.51337

.43630

.37136

.31657

.27027

.23107

.19785

.16963

.14564

.09293

18

.49363

.41552

.35034

.29586

.25025

.21199

.17986

.15282

.13004

.08081

19

.47464

.39573

.33051

.27615

.23171

.19449

.16351

.13768

.11611

.07027

20

.45639

.37689

.31180

.25842

.21455

.17843

.14864

.12403

.10367

.06110

Table4Present Value of an Annuity of 1

(n)Payments

4%

5%

6%

7%

8%

9%

10%

11%

12%

15%

1

.96154

.95238

.94340

.93458

.92593

.91743

.90909

.90090

.89286

.86957

2

1.88609

1.85941

1.83339

1.80802

1.78326

1.75911

1.73554

1.71252

1.69005

1.62571

3

2.77509

2.72325

2.67301

2.62432

2.57710

2.53130

2.48685

2.44371

2.40183

2.28323

4

3.62990

3.54595

3.46511

3.38721

3.31213

3.23972

3.16986

3.10245

3.03735

2.85498

5

4.45182

4.32948

4.21236

4.10020

3.99271

3.88965

3.79079

3.69590

3.60478

3.35216

6

5.24214

5.07569

4.91732

4.76654

4.62288

4.48592

4.35526

4.23054

4.11141

3.78448

7

6.00205

5.78637

5.58238

5.38929

5.20637

5.03295

4.86842

4.71220

4.56376

4.16042

8

6.73274

6.46321

6.20979

5.97130

5.74664

5.53482

5.33493

5.14612

4.96764

4.48732

9

7.43533

7.10782

6.80169

6.51523

6.24689

5.99525

5.75902

5.53705

5.32825

4.77158

10

8.11090

7.72173

7.36009

7.02358

6.71008

6.41766

6.14457

5.88923

5.65022

5.01877

11

8.76048

8.30641

7.88687

7.49867

7.13896

6.80519

6.49506

6.20652

5.93770

5.23371

12

9.38507

8.86325

8.38384

7.94269

7.53608

7.16073

6.81369

6.49236

6.19437

5.42062

13

9.98565

9.39357

8.85268

8.35765

7.90378

7.48690

7.10336

6.74987

6.42355

5.58315

14

10.56312

9.89864

9.29498

8.74547

8.24424

7.78615

7.36669

6.98187

6.62817

5.72448

15

11.11839

10.37966

9.71225

9.10791

8.55948

8.06069

7.60608

7.19087

6.81086

5.84737

16

11.65230

10.83777

10.10590

9.44665

8.85137

8.31256

7.82371

7.37916

6.97399

5.95424

17

12.16567

11.27407

10.47726

9.76322

9.12164

8.54363

8.02155

7.54879

7.11963

6.04716

18

12.65930

11.68959

10.82760

10.05909

9.37189

8.75563

8.20141

7.70162

7.24967

6.12797

19

13.13394

12.08532

11.15812

10.33560

9.60360

8.95012

8.36492

7.83929

7.36578

6.19823

20

13.59033

12.46221

11.46992

10.59401

9.81815

9.12855

8.51356

7.96333

7.46944

6.25933