Determine the net present value, Financial Management

The following information pertains to Fairways Driving Range, Inc.:

The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will need to purchase a ball dispensing machine, a ball pick-up vehicle and a tractor and accessories for a total cost of $70,000. All of this depreciable equipment will be 7-year MACRS property. The project is expected to operate for 6 years, at the end of which the equipment will be sold for 40% of its original cost. Fairways expects to have $40,000 of fixed costs each year other than depreciation. These fixed costs include the cost of leasing the land for the driving range.

Fairways expects to have sales for the first year of $80,000 based on renting 20,000 buckets of balls @ $4 per bucket. For years 2-6, they expect the number of buckets rented to steadily increase by 750 buckets per year, while the price will remain constant @ $4. Expenditures needed for buckets and balls each year are expected to be 15% of the gross revenues for the year.

The project would have an initial working capital requirement of $5,000 and this requirement will be 10% of all revenues after that. Fairways will be in the 15% tax bracket for all years in question. The company's required rate of return for this project is 20%.

Please complete the following tables to determine the NPV for Fairways Driving Range,

Posted Date: 5/3/2013 7:13:01 AM | Location : United States







Related Discussions:- Determine the net present value, Assignment Help, Ask Question on Determine the net present value, Get Answer, Expert's Help, Determine the net present value Discussions

Write discussion on Determine the net present value
Your posts are moderated
Related Questions
ESSENTIAL FEATURES OF A SOUND CAPITAL MIX A sound or an appropriate Capital structure should have the following essential features : highest possible use of leverage

Q. Describe about Permanent Working Capital? Permanent Working Capital: - The requirement for working capital fluctuates from time to time. Nevertheless to carry on day-to-day

Q. Show the Projected Balance Sheet Method? Projected Balance Sheet Method: - Under this process an approximate is made of assets and liabilities for a future date and a projec

you would like to purchase a new car in 3 years.The current value of the vehicle you would like to purchseis 100000.The manufacturer of the vehicle has advised you,that the cost of

A manager must be able to quantify as to what will result from an adverse change in interest rates to control interest rate risk. Different types of valuation mode

When an investor invests in fixed income securities, he receives returns from one or more of the following sources: Coupon Interest payment.

FORMS OF DIVIDEND Cash Dividend Many Companies pay dividend in cash. Often cash dividend may be supplemented by a bonus issue (stock dividend).  When the company chooses

Home Inc. is considering buying a new piece of equipment, which will cost $715,000 and has an economic life of 5 years, in order to produce a new line of product.  The company beli

The case of McKesson & Robbins scandal (1938) was happen due to internal fraud. This case is also happen by the faulty work of board of directors. The organization of McKesson & Ro

Q. Define Finance Function and discuss its nature and scope Ans. Meaning of Finance: - Finance is defined as the provision of funds at the time when it is required. The role of