The Heritage Amusement Park would like to construct a new ride called the Sonic

Question

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 $680,000 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): Compute the pay back period associated with the new ride. Assume that the Heritage Amusement Park will not construct a new ride unless the ride provides a payback period of 6 years or less. Does the Sonic Boom ride satisfy this requirement? No Yes

Explanation / Answer

1a.7.595 years

1b.yes

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