You own an ice rink and are considering investing in a new high speed Zamboni (ice resurfacing
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Question:
You own an ice rink and are considering investing in a new high speed Zamboni (ice resurfacing machine). This would require an investment of $36,000 (the cost!). You are projecting that with the new Zamboni, additional related annual net cash inflows (with more available ice time for hockey leagues, skating parties, etc.) would be $10,000 annually. The Zamboni is expected to have a 6 year useful life with no salvage/residual value. |
Your desired discount rate to use where applicable (present value of annuity table is further below) is as follows: 14% |
Answer each of the following: (% answers can be rounded to nearest whole %), mustshow calculations* forany partial or full credit: * Use the methods from this course; no Excel usage. |
A) What is the expected Simple (accounting)Rate of Return? |
B) What is the expected Payback period? |
C) What is the expected Net Present Value atyour desired discount rate? |
D) What is theexpectedInternal Rate of Return? |
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