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

60.1K

Verified Solution

Question

Finance

Outdoor Sports is considering adding a putt putt golf course toits facility. The course would cost $172,000, would be depreciatedon a straight-line basis over its 5-year life, and would have azero salvage value. The sales would be $86,500 a year, withvariable costs of $27,650 and fixed costs of $12,250. In addition,the firm anticipates an additional $17,300 in revenue from itsexisting facilities if the putt putt course is added. The projectwill require $2,850 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 13 percent and a tax rate of 35percent?

Answer & Explanation Solved by verified expert

4.5 Ratings (775 Votes)

Initial Investment Cost Initial Investment Cost Investment in Fixed Assets Working Capital Required 172000 2850 174850 Annual Operating Cash Flow Annual Operating Cash Flow Annual Sales Additional sales Variable See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Outdoor Sports is considering adding a putt putt golf course toits facility. The course would cost $172,000, would be depreciatedon a straight-line basis over its 5-year life, and would have azero salvage value. The sales would be $86,500 a year, withvariable costs of $27,650 and fixed costs of $12,250. In addition,the firm anticipates an additional $17,300 in revenue from itsexisting facilities if the putt putt course is added. The projectwill require $2,850 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 13 percent and a tax rate of 35percent?