Country Club is considering adding a miniature golf course to its facility. The

Question

Country Club is considering adding a miniature golf course to its facility. The course would cost $52,000, would be depreciated on a straight line basis over its 4-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $33,000 a year with $9,000 of that amount being variable cost. The fixed cost would be $7,200. In addition, the firm anticipates an additional $10,000 in revenue from its existing facilities if the course is added. The project will require $6,000 of net working capital, which is recoverable at the end of the project. What is the initial cash flow at year 0 of this project?

Explanation / Answer

$17,388.78

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