Question: White Sands Resort is considering adding a new dock to accommodate large yachts. The dock would cost $ 700,000 and would generate $ 144,000 annually

White Sands Resort is considering adding a new dock to accommodate large yachts. The dock would cost $ 700,000 and would generate $ 144,000 annually in new cash inflows. Its expected life would be eight years, with no salvage value. The resort’s cost of capital and discount rate are 7 percent.

a. Calculate the internal rate of return for the proposed dock addition (round to the nearest whole percent).

b. Based on your answer to (a), should the resort add the new dock?

c. How much annual cash inflow would be required for the project to be minimally acceptable?

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