Study guide , Managerial Accounting

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, Inc.’s proposed Sanford venture. PLEASE ROUND ALL FIGURES TO THE NEAREST WHOLE DOLLAR!
Posted Date: 4/2/2013 2:35:00 PM | Location : United States







Related Discussions:- Study guide , Assignment Help, Ask Question on Study guide , Get Answer, Expert's Help, Study guide Discussions

Write discussion on Study guide
Your posts are moderated
Related Questions
Strategic Positioning The company must identify its strategic choices. This can be done from the firm’s objectives, which emanates from the firms mission. Strategies have to be

Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70. Estimated costs for the two products are;

Pricing decision Price may be defined as the exchange of goods or services in terms of money. Without price firm can survive in the society. If money is not there exchange of g

Viti Ltd, located in southern Viti Levu, manufactures a variety of industrial valves and pipe fittings that are sold to customers in the eastern states. Currently, the company is o

what is the topic about? what are the practical implications? what are the practical criticisms?

Explain Out of pocket cost A cost which will have to be paid to outsides as against cross such as depreciation, which do not require any cash payment this cost is relevant in t

when assessing Market Value of common stock, is the "market value" the market value when the company sold the stock or the current market value?

A company manufactures a one product. Estimated cost data regarding this product and other information for the product and the company are as follows: Sales price per unit Rs.2000

Q. Pricing over the life cycle of a product? The cycle begins with the invention of the new product. The innovation of a new product and its degeneration to a common product is