Question

Dandy's Fun Park is evaluating the purchase of a new game to be located on its Midway.? Dandy's has narrowed their choices down to? two: the Wacky Water Race game and the

Whackminus?Aminus?Mole

game. Financial data about the two choices follows.

	Wacky Water Race	Whackminus?Aminus? Mole
Investment	?$28,000	?$27,000
Useful life	5	5
Estimated annual net cash inflows for 5 years	?$10,000	?$3,000
Residual value	?$2,000	?$5,000
Depreciation method	straightminus?line	straightminus?line
Required rate of return	?8%	?10%

What is the total present value of future cash inflows and residual value from the

Whackminus?Aminus?Mole

?game?

Answer 1

Statement showing Cash flows			Wacky WaterRace
Particulars	Time	PVf 8%	Amount	PV
Cash inflows	1.00	0.9259	10,000.00	9,259.26
Cash inflows	2.00	0.8573	10,000.00	8,573.39
Cash inflows	3.00	0.7938	10,000.00	7,938.32
Cash inflows	4.00	0.7350	10,000.00	7,350.30
Cash inflows	5.00	0.6806	10,000.00	6,805.83
Cash inflows	5.00	0.6806	2,000.00	1,361.17
present value of future cash inflows and residual value				41,288.27
Statement showing Cash flows			Whackminus?Aminus?Mole
Particulars	Time	PVf 10%	Amount	PV
Cash inflows	1.00	0.9091	3,000.00	2,727.27
Cash inflows	2.00	0.8264	3,000.00	2,479.34
Cash inflows	3.00	0.7513	3,000.00	2,253.94
Cash inflows	4.00	0.6830	3,000.00	2,049.04
Cash inflows	5.00	0.6209	3,000.00	1,862.76
Cash inflows	5.00	0.6209	5,000.00	3,104.61
present value of future cash inflows and residual value				14,476.97