EBK CONTEMPORARY ENGINEERING ECONOMICS
EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 8220101336736
Author: Park
Publisher: PEARSON
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Chapter 7, Problem 5ST

(a):

To determine

Selection of the project

(b):

To determine

Selection of the Range.

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Payback Period and Net Present Value If a project with conventional cash flows has a payback period less than the project’s life, can you definitively state the algebraic sign of the NPV? Why or why not? If you know that the discounted payback period is less than the project’s life, what can you say about the NPV? Explain.   Q
You are considering developing an​ 18-hole championship golf course that requires an investment of ​$18,000,000. This investment cost includes the course​ development, club​ house, and golf carts. Once​ constructed, you expect the maintenance cost for the golf course to be ​$640,000 in the first​ year, ​$695,000 in the second year and continue to increase by $55,000 in subsequent years. The net revenue generated from selling food and beverage will be about 17​% of greens fees paid by the players. The cart fee per player is ​$20​, and 40,000 rounds of golf are expected per year. You will own and operate the course complex for 9 years and expect to sell it for ​$24,000,000. What is the greens fee per round that will provide a return on investment of 17​%? Assume that the greens fee will be increased at an annual rate of 6​%. The greens fee that will provide a return on investment of 17​% is _____ per round. ​(Round to the nearest​ cent.)
Suppose that you plan to retire at 65. You invest $8,000 per year on your birthday for 10 years starting on your 25th and ending on your 34th birthday. Since you are young, you take more risks with your investments, and earn a rate of return of 12%. Then, you have children and decide to put all your retirement savings into investing in a college fund for them. You leave all accumulated funds in the retirement account, and it earns 6% per year, reflecting an (unwise) rise in caution during middle age. How much money will you have to retire on at 65 (31 years after you stop contributing)
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