Question

Coolplay Corp. is thinking about opening a soccer camp in southern California. To start the camp, Coolplay would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year, the camp would be run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 12–18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Coolplay can sell the property for more than it was originally purchased for. The following amounts have been estimated.

Cost of land		$324,000
Cost to   build soccer fields, dorm and dining facility		$648,000
Annual   cash inflows assuming 150 players and 8 weeks		$993,600
Annual   cash outflows		$907,200
Estimated   useful life		20   years
Salvage   value		$1,620,000
Discount   rate		8%

 

Calculate the net present value of the project. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value

$Type   your answer here

Should the project be accepted?

The project Choose your answer here                                      shouldshould not be   accepted.

 

 

 

 

 

 

Question Part Score

To gauge the sensitivity of the project to these estimates, assume that if only 125 players attend each week, annual cash inflows will be $869,400 and annual cash outflows will be $810,000.

What is the net present value using these alternative estimates? (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net   present value

$Type your answer here

Should the project be accepted?

The   project should be Choose   your answer here                                      rejectedaccepted.

 

Question Part Score

Assuming the original facts, what is the net present value if the project is actually riskier than first assumed and a 10% discount rate is more appropriate? (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net   present value

$Type your answer here

Should the project be accepted?

The   project Choose your   answer here                                      shouldshould not be   accepted.