Question

A 473-foot, 7000-ton World War II troop carrier (once commissioned as the SS Excambion) was sunk in the Gulf of Mexico to serve as an underwater habitat and diving destination. The project took 10 years of planning and cost $4 million, which was spent equally at $400,000 in years 1 through 10. Fishing and recreation activities, estimated at $270,000 per year, will begin in year 11 and are expected to continue in perpetuity. Determine the rate of return on the venture using (a) tabulated factors.

Answer 1

$368,800

Step-by-step explanation:

Base on the scenario been described in the question, we can deduce the tabulated factors as follows;

0 = ( -400,000 × (F/a,i,n) ) + (270,00÷i)

Using 5%

0 = ( -400,000 × (F/a,5%,n) ) + (270,00÷5%)

= ( -400,00× (12.578) + ( 270,00÷0.05)

= (-5,031,200) + (5,400,00)

= $368,800 which is too low

As the answer