Problem
The management of an amusement park is considering purchasing a new ride for $72,000 that would have a useful life of 9 years and a salvage value of $8,000. The ride would require annual operating costs of $36,000 throughout its useful life. The company's discount rate is 11%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers. (Ignore income taxes.)
Required: How much additional revenue would the ride have to generate per year to make it an attractive investment?