20 pts) Meandering River Floats is considering adding a white water adventure slide to its facility. The slide would require an investment of $180,000, which would be depreciated on a straight-line basis over its four-year life, and would have a zero salvage value. The estimated income from the water slide fees would be $108,000 a year with $52,500 of costs. In addition, the firm anticipates an additional $21,000 in revenue per year from its existing facilities if the new slide is added. The project will require $15,000 of net working capital, which is recoverable at the end of the project. Assume a discount rate of 12 percent and a tax rate of 21 percent.

THE ANNUAL OPERATING CASH FLOW IS $ _____________.

USE OCF = $70,000.00 IF YOU GOT STUCK ON PART (a)!

c) Compute the following for the potential project:

i) Payback Period ______ YEARS

ii) Net Present Value (NPV) $ ______________

iii) Internal Rate of Return (IRR) ______________ PERCENT

iv) Profitability Index ______________

d) Should Meandering River add the slide? ______________