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The Parks and Recreation Department has suggested renovating the municipal golf course at a cost of $1.1 million with an annual operating cost of $255,000
The Parks and Recreation Department has suggested renovating the municipal golf course at a cost of $1.1 million with an annual operating cost of $255,000 and an annual savings of $295,000. The expected life of the golf course is seven years before the city will have to make a major investment in improving the course. Calculate the payback period, remaining asset life, and the actual savings. Explain the results
| 7. Pay Back, Remaining Life, and Actual Savings | ||
| Renovations: $1,100,000 | $1,100,000 | |
| Annual operating cost: $255,000 | $255,000 | |
| Annual savings: $295,000 | $295,000 | |
| Lifespan: 7 years | 7 | |
| NSAV = | $40,000 | |
| Payback period = | $27.50 | |
| Remaining life = | 7 | |
| Actual Savings = | $40,000.00 | |
| Explanation: |
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