The following information pertains to Fairways Driving Range, Inc.:
The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will need to purchase a ball dispensing machine, a ball pick-up vehicle and a tractor and accessories for a total cost of $100,000. All of this depreciable equipment will be 7-year MACRS property.
The project is expected to operate for 6 years, at the end of which the equipment will be sold for 25% of its original cost. Fairway $30,000 of fixed costs each year other than depreiation. These fixed costs include the cost of leasing the land for the driving range.
Fairways expects to have sales for the first year of $100,000 based on renting $20,000 buckets of balls @ $5 per bucket.
For years 2-6, they expect the number of buckets rented to steadily increase by 1,000 buckets per year, while the price will remain constant @ $5. Expenditures needed for buckets and balls each year are expected to be 20% of the gross revenues for the year. Fairway will be in the 34% tax bracket for all years in question.
Please round all figures to the nearest whole DOLLAR!
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