Problem 12-5A Problem 12-5A Coolplay Corp. is thinking about opening a soccer ca
ID: 2414145 • Letter: P
Question
Problem 12-5A
Problem 12-5A
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 $330,900 Cost to build soccer fields, dorm and dining facility $661,800 Annual cash inflows assuming 150 players and 8 weeks $1,014,760 Annual cash outflows $926,520 Estimated useful life 20 years Salvage value $1,654,500 Discount rate 8%
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Explanation / Answer
b
d
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Cost of land $ 330,900 Cost to build soccer fields, dorm and dining facility $ 661,800 Total Investment $ 992,700 Annual cash inflows $ 1,014,760 Annual cash outflows $ 926,520 Net Inflows $ 88,240 Estimated useful life 20 years Salvage value $ 1,654,500 Discount rate 8%