Question

In: Finance

Valley Club is considering adding a miniature golf course to its facility. The course would cost...

  1. Valley Club is considering adding a miniature golf course to its facility. The course would cost $44,000, would be depreciated on a straight-line basis over its 4-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $33,000 a year with $9,000 of that amount being variable cost. The fixed cost would be $6,200. The project will require $3,000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 20 percent?

    $2,152.90

    $8,734.16

    $4,840.58

    $6,412.69

Solutions

Expert Solution

INITIAL INVESTMENT = COCT OF GOLF COURSE + WORKING CAPITAL = 44000 + 3000 = 47000


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