Family Fun Park is evaluating the purchase of a new game to be located on its Mi

Question

Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed their choices down to two: the Wacky Water Race game and the Whack - A - Mole game. Financial data about the two choices follows Whack- Wacky Water Race A- Mole $15,000 Investment Useful life Estimated annual net cash inflows for 7 Residual value $26,000 $9,000 2,000 straight-line 3% 57,000 51,000 straight-line 10% years Depreciation method Required rate of return What is the total present value of future cash inflows and residual value from the Wacky Water Race game? (The present value for this scenario is 0.583 and the $48,020 $34,589 $22.020 $45.688 OA. B. OC. OD,

Explanation / Answer

Answer is $ 48020 Explanation: Annual net cash inflowws 9000 Annuity factor for 7 years at 8% 5.206 Present value of Cash inflows 46854 Add: Present value of salvage value 1166 ($ 2000 * PVF at 0.5835) Present value of cash inflows & salvage 48020

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