KT Enterprises Would Like to Construct and Operate a New

question 44

Essay

KT Enterprises would like to construct and operate a new ice skating rink.In addition to the capital expenditures on the rink,management estimates that the project will require an investment today of $220,000 in net working capital.The firm will recover the investment in net working capital fifteen years from today,when management anticipates closing the rink.The discount rate for this type of cash flow is 8% per year.Calculate the present value of the cost of working capital for the ice skating rink.

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Definitions:

U.S. Financial Markets

A broad term encompassing all markets where buyers and sellers engage in the trade of financial securities like stocks and bonds within the United States.

External User

External users are individuals or entities outside a company who use financial statements to make decisions about the company, such as investors and creditors.

Business Enterprise

An organizational entity involved in commercial, industrial, or professional activities with the goal of generating economic returns.

Information Management

The process of collecting, storing, managing, and distributing information in an efficient and effective manner to support business processes.