Marge's Campground is considering adding a miniature golf course to its facility. The course equipment she wants would cost $400,000, and would be depreciated on a straight-line basis over 8 years with zero salvage value. However, Marge estimates that the project will be run for 4 years only, and a 4-year time horizon will be used. Further, assume that the company can sell the equipment for $220,000 at the end of year 4. Marge estimates the income from the golf fees would be $280,000 a year with $100,000 variable cost. The fixed cost would be $50,000. The project will require $10,000 of net working capital which is recoverable at the end of the project. Assume a 20% marginal tax rate for the company and the projects required rate of return of 16 percent.

1. Calculate annual operating CFs for the miniature golf facility for years 1-4. Show your work.

b. What is the BV of the equipment at the end of year 4? Is there a tax liability or tax credit on the sale of the equipment? Calculate total CF for year 4 including the Terminal value.

c. What is the NPV of this project? Would you accept this project?