Problem - Star Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $196,009 and have an estimated useful life of 9 years. It will be sold for $65,400 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $29,600. The company's borrowing rate is 8%. Its cost of capital is 10%.
Calculate the net present value of this project to the company and determine whether the project is acceptable.