Determine the net present value, Financial Management

Assignment Help:

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,


Related Discussions:- Determine the net present value

Dual aspect concept - accounting principle, Dual Aspect Concept - Accountin...

Dual Aspect Concept - Accounting Principle This is, no doubt, the basic concept in accounting.  Under this concept, each transaction has got a two-fold aspect: (i) yielding

Determine about the entity level - inherent risk, At entity level - Inheren...

At entity level - Inherent risk Integrity of management. Management's experience and knowledge Over reliance on key customers. Unusual pressures on management

Financial statement, A company commissioned a valuation of its land and bui...

A company commissioned a valuation of its land and buildings for inclusion in its financial statements. The valuation document contained the following details:

Managing risk and contingency plan, Managing Risk and Contingency Plan: ...

Managing Risk and Contingency Plan: An essential component of any financial management framework is the validation and protection of the information contained in the system. In

Explain the meaning of - purchase consideration, Explain the meaning of - P...

Explain the meaning of - Purchase consideration The  type  of  offer  made  to  target  company's  shareholders  would have  a  big  impact on acceptance. Apparently the price

Profitability index (pi), Profitability Index (PI) : It is a ratio of t...

Profitability Index (PI) : It is a ratio of the present value of the total cash benefits to the present value of the net cash outlay.  The higher the PI, the higher the return.

Interpretations of long term solvency or liquidity ratio''s, Long Term Solv...

Long Term Solvency or Liquidity Ratio's   DE:          The Debt Equity ratio exhibits the relation that exists between debt and proprietor's fund and is considered a very im

Buying and selling securities, Buying and Selling Securities One of the k...

Buying and Selling Securities One of the key features that may occur while investing in financial markets is that sometimes investors overlook the essential factors they should c

Cases let, How would you judge the potential profit of Bajaj Electronics on...

How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit.

Estimate the montly deposite, Mr. Moore will be 35 years at the end of the ...

Mr. Moore will be 35 years at the end of the month and he wishes to retire in 25 years. He plans to invest in a mutual fund earning 7.5 percent annual return compounded monthly an

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd