Question

Moving to another question will save this response. Question 13 of 25 Question 13 1 points Save Answe Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $189.000, would be depreciated on a straight line basis over its 6-year life, and would have a zero salvage value. The sales would be $94.500 a year, with variable costs of $28,450 and foxed costs of $13.050. In addition, the firm anticipates an additional $23.700 in revenue from its existing facilities if the putt putt course is added. The project will require 53,650 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 13 percent and a tax rate of 40 percent? 0547.823 $44,173 $12.672 $69.224 $46,070

Answer 1

Answer:
Calculation of NPV
Formula will will use here
NPV =	Present value of Cash inflows - Initial cost
Project A
Initial cost =	191650.00
Year	1	2	3	4	5	6
Sales and Revenue	118200	118200	118200	118200	118200	118200
Less: Cost	41500	41500	41500	41500	41500	41500
Gross profit	76700	76700	76700	76700	76700	76700
Less: Depreciation	31333.33	31333.33	31333.33	31333.33	31333.33	31333.33
Profit before tax	45366.67	45366.67	45366.67	45366.67	45366.67	45366.67
Less: Tax	18146.67	18146.67	18146.67	18146.67	18146.67	18146.67
Proft after tax	27220	27220	27220	27220	27220	27220
Add: Depreciation	31333.33	31333.33	31333.33	31333.33	31333.33	31333.33
Add: Net working capital reversed	0.00	0.00	0.00	0.00	0.00	3650.00
Ne operating cash flow	58553.33	58553.33	58553.33	58553.33	58553.33	62203.33
PVF	0.884956	0.783147	0.693050	0.613319	0.542760	0.480319
Present value	51817.11	45855.85	40580.40	35911.86	31780.40	29877.41	235823.03
Total			236400
NPV of Project
Present vallue of cash inflows		235823.03
Less: Initial cost		191650.00
NPV of the Project		$44,173.00	(Answer)