The Golf Range Is Considering Adding an Additional Driving Range

question 18

Multiple Choice

The Golf Range is considering adding an additional driving range to its facility.The range would cost $76,000,would be depreciated on a straight-line basis over its seven-year life,and would have a zero salvage value.The anticipated income from the project is $34,000 a year with $14,400 of that amount being variable cost.The fixed cost would be $16,200.The firm believes that it will earn an additional $13,000 a year from its current operations should the driving range be added.The project will require $2,000 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)7.53 percent
• B)9.29 percent
• C)11.47 percent
• D)12.68 percent
• E)14.04 percent

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