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Fun Land is considering adding a miniature golf course to its facility. The course would cost $60000, 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 $30000 a year with $9000 of that amount being variable cost. The fixed cost would be $9000. In addition, the firm anticipates an additional $12000 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.

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Question: What is the net present value of this project at a discount rate of 10 percent and a tax rate of 40 percent?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166561

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