(Present value tables are needed.)Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows. What is the total present value of future cash inflows from the Wacky Water Race game?

Question

(Present value tables are needed.)Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows.  What is the total present value of future cash inflows from the Wacky Water Race game?

Quizplus · Accepted Answer

To calculate the total present value of future cash inflows for the Wacky Water Race game, we need to use the present value of an annuity table. The cash inflows for the Wacky Water Race game are $10,000 per year for 4 years. Using the table, we find the present value factor for an annuity of $1 per year for 4 years at 8% discount rate is 3.3121.

Therefore, the total present value of future cash inflows from the Wacky Water Race game is calculated as:

$10,000 × 3.3121 = $33,121

Since the total present value of future cash inflows for the Wacky Water Race game is greater than that of the Whack-A-Mole game ($31,690), the best choice would be to purchase the Wacky Water Race game.

(Present Value Tables Are Needed