MidWest Amusements is in the process of reviewing 10 proposals for new rides at its theme...

MidWest Amusements is in the process of reviewing 10 proposals for new rides at its theme parks in cities scattered throughout the American heartland. The company’s only experienced safety engineer must carefully review plans and monitor the construction of all new rides. However, she is only available to work on new rides for 1,479 hours during the year. The net present values and the amount of safety engineer time required for the proposed rides are listed below:

Proposed Ride	Net Present Value		Safety Engineer Time Required (hours)
Ride 1	$	930,000	250
Ride 2		1,152,000	360
Ride 3		615,000	300
Ride 4		593,250	175
Ride 5		542,500	250
Ride 6		506,250	150
Ride 7		448,000	112
Ride 8		687,800	362
Ride 9		637,000	182
Ride 10		418,320	252
Total	$	6,530,120	2,393

Required:

1. Which of the proposed rides should the company build this year? (Note: The incremental profit of a long-term project such as constructing a new ride is its net present value.) (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Ride 1
	Ride 6
	Ride 3
	Ride 9
	Ride 5
	Ride 4
	Ride 7
	Ride 10
	Ride 2
	Ride 8

2. What would be the total net present value of the rides built under your plan?












Total	$0

Expert Solution

Answer Q1
We have limiting factor of total hr of 1,479 during the year. Lets compute NPV/hr for each of the propose ride .
Based on highest NPV/hr we can rank the proposed ride

Proposed Ride	Net Present Value	Safety Engineer Time Required (hours)	NPV/Hr
Ride 1	930,000	250	3720
Ride 2	1,152,000	360	3200
Ride 3	615,000	300	2050
Ride 4	593,250	175	3390
Ride 5	542,500	250	2170
Ride 6	506,250	150	3375
Ride 7	448,000	112	4000
Ride 8	687,800	362	1900
Ride 9	637,000	182	3500
Ride 10	418,320	252	1660
Total	6,530,120	2,393

Proposed ride based on ranking (Highest to lowest NPV/Hr)
Proposed Ride	Net Present Value	Safety Engineer Time Required (hours)	NPV/Hr	Commulative hr
Ride 7	448,000	112	4000	112
Ride 1	930,000	250	3720	362
Ride 9	637,000	182	3500	544
Ride 4	593,250	175	3390	719
Ride 6	506,250	150	3375	869
Ride 2	1,152,000	360	3200	1229
Ride 5	542,500	250	2170	1479
Ride 3	615,000	300	2050
Ride 8	687,800	362	1900
Ride 10	418,320	252	1660
Total	6,530,120	2,393

As total hr at commulative level reach to 1479 at Ride 5. We should build - below ride
Ride 7	Ride 1	Ride 9	Ride 4	Ride 6	Ride 2	Ride 5

Answer Q2
Total NPV
Proposed Ride	Net Present Value
Ride 7	448,000
Ride 1	930,000
Ride 9	637,000
Ride 4	593,250
Ride 6	506,250
Ride 2	1,152,000
Ride 5	542,500
Total NPV	4,809,000

ekkarill92 answered 1 year ago

theme park owner wants to know if the children’s rides are favoring 10 year old girls...

theme park owner wants to know if the children’s rides are favoring 10 year old girls over 10 year old boys based on height. In other words, does one group taller than the other and thus can go on more rides? Part a: The owner gathered height data on 10 year old girls and 10 year old boys, see data below. Determine at the 5% significance level if there is evidence that the two genders are not the same height...

How can a theme park eliminate waiting in long lines including rides etc. How much will...

How can a theme park eliminate waiting in long lines including rides etc. How much will they cost? What resources and expenditures will your solution entail?

An automobile insurance company is in the process of reviewing its policies. The company is considering...

An automobile insurance company is in the process of reviewing its policies. The company is considering increasing the premium charged to drivers under 25. According to company records, 35 percent of the insured drivers are under the age of 25. Company records also show that 280 of the 700 insured drivers under the age of 25 have been involved in at least one automobile accident. On the other hand, only 130 of the 1300 insured drivers 25 years or older...

. Simson and Simpson, Inc. with its WACC of 10% has two investment proposals with the...

. Simson and Simpson, Inc. with its WACC of 10% has two investment proposals with the following characteristics: ____________________________________________________________________________ PROJECT APROJECT B ___________________________________________________ Period ICO Cash Flows ICO Cash Flows ____________________________________________________________________________ 0 $(9,000) -$(12,000) - 1$5,000 $5,000 2$4,000 $5,000 3$3,000 $8,000 ____________________________________________________________________________ (A).Compute the internal rate of return for Projects A & B. (5) (B).On a graph draw the net present value profiles for each project using 5 discount rates. (5) (C).Identify the crossover point....

AdventureParks Ltd is evaluating the construction of a new theme park. The theme park would cost...

AdventureParks Ltd is evaluating the construction of a new theme park. The theme park would cost $ 495 million, but would operate for 20 years. AdvertureParks expects annual cash flows from operating the theme park to be $ 70.6 million and its cost of capital is 12.0 %. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should AdventureParks go ahead with the purchase? d. How far off could AdventureParks' cost of capital...

The theme this week deals with the creation of a new venture and managing that new...

The theme this week deals with the creation of a new venture and managing that new business. Based on the videos, readings, and your own experience/knowledge, what are the TOP TEN biggest challenges facing an entrepreneur starting a new business (and explain why, for each issue)? List these TEN challenges in order of priority and place an importance factor on each challenge (a number 0-100, with 100 signifying an enormously important challenge). Some students argue that it depends on the...

10.) The unit manager is reviewing potential HIPPA confidentiality breaches with a new nurse. Which of...

10.) The unit manager is reviewing potential HIPPA confidentiality breaches with a new nurse. Which of the following are examples of potentially breaching confidentiality of a patient's health information? Select all that apply a.) providing family member with code word for phone information access. b.) sharing a password with a colleague c.) failing to log off a computer on the nursing unit d.) discussing patient information in a public area. e.) sending a fax with an appropriate cover page stating...

An investor is reviewing two proposals, assuming similar risk profiles and a 14% required return, which...

An investor is reviewing two proposals, assuming similar risk profiles and a 14% required return, which one should the investor buy? Why? Lee Vista: Purchase Price: $464,000 Cash flows from operations: Year 1 $48,000 Year 2 $49,440 Year 3 $50,923 Year 4 $52,451 Year 5 $54,025 Cash flow from sale on year 5 $560,000 Colony Park: Purchase Price: $500,000 Cash flows from operations: Year 1 $56,000 Year 2 $57,400 Year 3 $58,835 Year 4 $60,306 Year 5 $61,814 Cash flow...

Which of the following choices is a component of the reviewing process?

Which of the following choices is a component of the reviewing process? conducting the FAIR test determining the message structure determining the key points audience analysis identifying the primary message

Central Trailer Supply decided to also use NPV to review the three proposals for its new...

Central Trailer Supply decided to also use NPV to review the three proposals for its new trailer assembly line. Information on each proposal is the same and follows: Proposal X Proposal Y Proposal Z Initial investment in equipment $115,000 $130,000 $145,0000 Working capital needed 0 0 15,000 Annual cash saved by operations: Year 1 55,000 60,000 60,000 Year 2 55,000 40,000 60,000 Year 3 55,000 40,000 60,000 Year 4 55,000 10,000 60,000 Required: Determine each proposal's NPV. A rate of...

Question