Jamieson Enterprises is considering the development of a go kart track at an estimated total cost of $680,000 The go karts would have a $50,000 salvage value at the end of their 10 year useful life Estimated revenues and costs on an annual basis would be as follows Required Ignore income taxes 1 Ja...

1 Computation of the annual cash inflow associated with the new goc ...

Jamieson Enterprises is considering the development of a go-kart track at an estimated total cost of $680,000.

Question:

Jamieson Enterprises is considering the development of a go-kart track at an estimated total cost of $680,000. The go-karts would have a $50,000 at the end of their 10-year useful life. Estimated revenues and costs on an annual basis would be as follows:

Ticket revenues..... Less operating expenses: Maintenance and utilities.. Salaries... $380,000 $ 71000 130,000 63,000 43

Required:
Ignore income taxes.
1. Jamieson Enterprises will not proceed with development of the go-kart track unless the payback period is less than six years. Should they proceed?
2. Compute the simple rate of return for the go-kart track. If Jamieson Enterprises requires a simple rate of return of at least 10%, does the go-kart track meet this criterion?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...