13.Outdoor Sports is considering adding a miniature golf course which it expects to operate for five years. The course would cost $138,000, would be depreciated on a straight-line basis over its five-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $72,000 a year with $24,000 being the variable cost. The fixed cost would be $10,600. In addition, the firm anticipates an additional $14,000 in revenue from its existing facilities if the golf course is added. The project will require $2,000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 34 percent?

a.

$17,250.50

b.

$14,438.78

c.

$11,628.04

d.

$11,309.11

e.

$12,737.26

14.Idiosyncratic risks are:

a.

measured by beta.

b.

risk that affects many securities.

c.

equivalent to overall volatility.

d.

top concerns of investors.

e.

completely eliminated when a portfolio is fully diversified.