Question
The city of Coolsville is considering two options for an amusement park at the heart of the city. The cost estimates for these options are:
The city of Coolsville is considering two options for an amusement park at the heart of the city. The cost estimates for these options are:
| Description | Project A | Project B |
| Initial Cost | $5,000,000 | $6,000,000 |
| Annual Operating Cost | $300,000/yr | $350,000/yr |
| Overhaul at the End of Years 2 & 4 | -- | $60,000 |
| Overhaul at the End of Year 5 | $120,000 | -- |
| Salvage Value | $200,000 | $250,000 |
| Project Life | 8 years | 6 years |
| MARR | 12% | 12% |
Required
a) Calculate the EUAC of Project A?
b) Calculate the EUAC of Project B?
c) Which alternative should be selected? Why?
d) If the city expects 200,000 tourists to visit the park every year, what should the minimum ticket price be per visitor?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
a Calculate the EUAC of Project A EUACA Initial Cost EUACAnnual Operating Cost EUACOverhaul at the End of Year 5 Salvage Value Step 1 Calculate EUAC for Annual Operating Cost ...
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Step: 2
Step: 3
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
15th Edition
978-0256168723, 77388720, 256168725, 9780077388720, 978-007337960
