You work for a professional sport franchise that is considering purchasing a new digital scoreboard or renovating
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Question:
Scoreboard
The scoreboard will cost $100,000. You can trade in the old scoreboard for a $5,000 discount. Small changes to the stadium are required to install the new board, totalling $20,000. Installation will cost $3,000.
The scoreboard will have a useful life of 10 years and has no salvage value. Straight-line depreciation can be applied to the asset. The company's tax rate is 21%.
The franchise expects to sell an extra $20,000 worth of sponsorships a year with the new scoreboard. Increases in fan satisfaction are also expected to increase ticket revenue by $10,000 a year. The scoreboard will also increase maintenance and utility costs by $2,000 a year.
Answer in Excel Spreadsheet with headings of Year, Incremental Cash Flow, Cumulative Cash Flow, PVIF, Discounted Cumulative Cash Flow, and PV.
What is the initial cost of the scoreboard?
What is the incremental cash flow of the scoreboard for the first year (including the tax benefits)?
What is the project's payback period?
What is the project's discounted payback period?
What is the project's NPV?
What is the project's IRR?
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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