# The Heritage Amusement Park would like to construct a new ride called the - 17419

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## yousafbhutta

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 The Heritage Amusement Park would like to construct a new ride called the Sonic Boom, which the park management feels would be very popular. The ride would cost \$450,000 to construct, and it would have a 10% salvage value at the end of its 15-year useful life. The company estimates that the following annual costs and revenues would be associated with the ride: (Ignore income taxes):

 Ticket revenues \$ 250,000 Less operating expenses: Maintenance \$ 40,000 Salaries 90,000 Depreciation 27,000 Insurance 30,000 Total operating expenses 187,000 Net operating income \$ 63,000 Required: 1a. Compute the pay back period associated with the new ride.

 Payback period years

1b.

Assume that the Heritage Amusement Park will not construct a new ride unless the ride provides a payback period of six years or less. Does the Sonic Boom ride satisfy this requirement?

 2a. Compute the simple rate of return promised by the new ride. (Omit the "%" sign in your response.)

 Simple rate of return %

 2b. If Heritage Amusement Park requires a simple rate of return of at least 12%, does the Sonic Boom ride meet this criterion?

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