Staffing Virginia Tech football games

jagguarpaw January 9, 2017 0 Comments

Question: Staffing Virginia Tech football games (ticket & ba.

Staffing Virginia Tech football games (ticket & bag checkers, security, concessions, etc.) costs approximately S99, 000 each year. The university could invest in automatic body scanners and vending machines to cover gameday operations for $193.000 (note that the equipment has no MV after the 10-year life). If VT purchases this equipment, it will be depreciated using SL depreciation to a terminal BV of zero after 10 years. The equipment would still cost 572.000 per year for maintenance and operation. Virginia Tech has an effective income tax rate of 30% and expects that invested capital will earn at least 10% after income taxes are taken into account.

  1. Use the IRR method to determine if the equipment is a justifiable investment.
  2. If MACRS (seven-year recovery period) had been used in Part (a). Would the after-tax IRR be lower or higher than your answer to Part (a)?

a The after-tax IRR under  SL method % . (Round to one decimal place.)

The gameday equipment a justifiable investment.

  1. The after-tax IRR under the MACRS method is %. (Round to one decimal place).

For this situation the after-tax IRR under the MACRS method is than under the SL method.

Enter your answer in each c the answer boxes

X Staffing Virginia Tech football games