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SQLite Sports is considering adding a miniature golf course to its facility. The course would cost $133,526, would be depreciated on a straight line basis over its 5-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $73,833 a year with $22,716 of that amount being variable cost. The fixed cost would be $11,161. In addition, the firm anticipates an additional $12,003 in revenue from its existing facilities if the golf course is added. The project will require $3,059 of net working capital, which is recoverable at the end of the project.

Required:

Question: What is the net present value of this project at a discount rate of 8.4 percent and a tax rate of 35 percent?

Note: Please provide reasons to support your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166358

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