Outdoor Sports is considering adding a putt putt golf course to its facility. The course would...

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Outdoor Sports is considering adding a putt putt golf course toits facility. The course would cost $168,000, would be depreciatedon a straight-line basis over its 4-year life, and would have azero salvage value. The sales would be $90,300 a year, withvariable costs of $27,450 and fixed costs of $12,050. In addition,the firm anticipates an additional $15,700 in revenue from itsexisting facilities if the putt putt course is added. The projectwill require $2,650 of net working capital, which is recoverable atthe end of the project. What is the net present value of thisproject at a discount rate of 11 percent and a tax rate of 34percent?
$20,583
$53,262
$14,215
$12,469
$11,565

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4.1 Ratings (559 Votes)

Initial Investment for the Project Initial Investment for the Project Cost of the asset Working capital needed 168000 2650 170650 Annual Operating Cash Flow OCF Revenue 106000 90300 15700 Variable Costs 27450 Fixed See Answer

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Outdoor Sports is considering adding a putt putt golf course toits facility. The course would cost $168,000, would be depreciatedon a straight-line basis over its 4-year life, and would have azero salvage value. The sales would be $90,300 a year, withvariable costs of $27,450 and fixed costs of $12,050. In addition,the firm anticipates an additional $15,700 in revenue from itsexisting facilities if the putt putt course is added. The projectwill require $2,650 of net working capital, which is recoverable atthe end of the project. What is the net present value of thisproject at a discount rate of 11 percent and a tax rate of 34percent?$20,583$53,262$14,215$12,469$11,565