Fun Land is considering adding a miniature golf course to its facility. The cour

Question

Fun Land is considering adding a miniature golf course to its facility. The course would cost $63000, 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 $35000 a year with $6000 of that amount being variable cost. The fixed cost would be $8000. In addition, the firm anticipates an additional $15000 in revenue from its existing facilities if the course is added. The project will require $6000 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 11 percent and a tax rate of 40 percent?
Answer

$22,239.22

$28,873.94

$22,542.57

$21,510.62

$25,370.14

Explanation / Answer

$22,542.57

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