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.

---

Definitions:

Periodic Inventory System

An inventory accounting system where inventory counts are performed and updated at specific intervals to determine cost of goods sold and ending inventory levels.

Ending Inventory

The value of goods available for sale at the end of an accounting period. It is the beginning inventory plus purchases minus the cost of goods sold.

FIFO

"First In, First Out," a method used in inventory management and accounting where the oldest inventory items are sold or used first.

Net Income

Signifies the net income of a corporation following the subtraction of all costs and tax obligations from the overall revenue.