1. Coolplay Corp. is thinking about opening a soccer camp in southern California. To start the camp, Coolplay would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year, the camp would be run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 1218. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Coolplay can sell the property for more than it was originally purchased for. The following amounts have been estimated.

Cost of land		$330,900
Cost to build soccer fields, dorm and dining facility		$661,800
Annual cash inflows assuming 150 players and 8 weeks		$1,014,760
Annual cash outflows		$926,520
Estimated useful life		20 years
Salvage value		$1,654,500
Discount rate		8%

a ) Calculate the net present value of the project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

b) To gauge the sensitivity of the project to these estimates, assume that if only 125 players attend each week, annual cash inflows will be $809,830 and annual cash outflows will be $754,500. What is the net present value using these alternative estimates? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

c) Assuming the original facts, what is the net present value if the project is actually riskier than first assumed and a 10% discount rate is more appropriate? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

d) Assume that during the first 5 years, the annual net cash flows each year were only $40,240. At the end of the fifth year, the company is running low on cash, so management decides to sell the property for $1,339,992. What was the actual internal rate of return on the project? (Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

2.

Rihanna Company is considering purchasing new equipment for $470,400. It is expected that the equipment will produce net annual cash flows of $56,000 over its 10-year useful life. Annual depreciation will be $47,040. Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)

Cash payback period

enter the cash payback period in years rounded to 1 decimal place

years

3. Bonita Industries estimates its sales at 170000 units in the first quarter and that sales will increase by 21000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at

$4346000.

$5205500.

$2979500.

$6216588.