Isabelle Abiassi operates a popular summer camp for elementary
school children. Projections for the current year are as
follows:
Sales revenue
$7,800,000
Operating income
$687,500
Average assets
$3,920,000
The camp’s weighted-average cost of capital is 11%, and Isabelle
requires that all new investments generate a return on investment
of at least 15%. The camp’s current tax rate is 25%.
At last week’s advisory board meeting, Isabelle told the board that
she had up to $50,000 to invest in new facilities...