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    ACC 206 WEEK 5 ASSIGNMENT 4

    ACC 206 WEEK 5 Straightforward net-present-value and payback computations 
    STL Entertainment is considering the acquisition of a sight-seeing boat for summer tours along the Mississippi River. The following information is available:
    
    Cost of boat 	$500,000 
    Service life 	10 summer seasons 
    Disposal value at the end of 10 seasons 	$100,000 
    Capacity per trip 	300 passengers 
    Fixed operating costs per season (including straight-line depreciation) 	$160,000 
    Variable operating costs per trip 	$1,000 
    Ticket price	$5 per passenger
    
    All operating costs, except depreciation, require cash outlays. On the basis of similar operations in other parts of the country, management anticipates that each trip will be sold out and that 120,000 passengers will be carried each season. Ignore income taxes.
    
    Instructions: 
    By using the net-present-value method, determine whether STL Entertainment should acquire the boat. Assume a 14% desired return on all investments- round calculations to the nearest dollar.
    

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