Answer Happy

You have an opportunity to invest in a concession at a world
exposition. To use the building and exhibits more fully, the
venture is expected to cover a six-year period consisting of a
preliminary year, the two years of formal exposition, and a
three-year period of reduced operation as a regional
exposition.
The terms of the concession agreement specify the following:
1. At inception, a $40,000 deposit is paid to Global Expo, Inc.,
the promoting organization. This amount is returned in full at the
end of the six years if the operator maintains the concession in
order and keeps it open during scheduled hours. The deposit is not
tax deductible, nor is its return subject to income
taxes.
2. The operator must install certain fixtures that will cost
$220,000. The fixtures become the property of Global Expo, Inc., at
the end of the six years.
After careful investigation and consultation with local experts,
you conclude that the following schedule reflects the estimated
pre-tax income of the concession (amounts in thousands of dollars):
Assuming an income tax rate of 40% and a desired annual return
of 9%, what is the net present value of this investment
opportunity?
Round answers to the nearest whole number. Use rounded answers
for subsequent calculations.
Use a negative sign with net present value to indicate a negative
amount. Otherwise do not use negative signs with your answers.
Enter answers below using complete numbers. Do not enter answers
in thousands as shown above in the exhibit. For
example, Year 1 Sales figure above shows as $140. The number
would be entered below as $140,000.
What is the maximum amount that could be invested and still earning
a 9% annual return?
$Answer