The Golf Range Is Considering Adding an Additional Driving Range

question 24

Multiple Choice

The Golf Range is considering adding an additional driving range to its facility.The range would cost $229,000, would be depreciated on a straight-line basis over its seven-year life, and would have a zero salvage value.The anticipated revenue from the project is $62,500 a year with $18,400 of that amount being variable cost.The fixed cost would be $15,700.The firm believes that it will earn an additional $22,500 a year from its current operations should the driving range be added.The project will require $3,000 of net working capital, which is recoverable at the end of the project.What is the internal rate of return on this project at a tax rate of 34 percent?

• A)8.32 percent
• B)8.68 percent
• C)7.47 percent
• D)11.09 percent
• E)12.14 percent

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Definitions:

International Sales Deal

A business agreement involving the exchange of goods or services across national boundaries, often requiring considerations for cultural differences, currency exchange, and import-export regulations.

Clarification and Justification

The process of making something clearer or more understandable while also providing reasons or evidence to support a position, action, or decision.

Negotiation

A process where two or more parties discuss an issue with the aim of reaching a mutually acceptable agreement.

Proposal

A plan or suggestion, especially a formal or written one, put forward for consideration or discussion by others.