Question
Valley Club is considering adding a miniature golf course to its facility.
The course would cost $48,000, would be depreciated on a straight-line basis over its 4-year life, and would have a zero salvage value.
The estimated income from the golfing fees would be $33,000 a year with $9,000 of that amount being variable cost.
The fixed cost would be $7,200. The project will require $5,000 of net working capital, which is recoverable at the end of the project.
What is the operating cash flow of this project for year 1 to year 4 at a tax rate of 30 percent?