Project Description:

Soccer turf fields are very successful businesses in Greece, and you decide to export this business model to the use Specitically, you plan to start a business that rents organized soccer turf fields by the hour in Washington, DC. Since there are no direct competitors, you feel confident that renting soccer fields by the hour will be a successful business. However, to be conservative, yo u plan for a ' vear projecthoron. After that time, increased competition (or lack of interest) may well make the project unviable.

Data: You put down a (non-refundable) $10,000 retainer to hire a DC attorney to look into licensing and laws for you. Judging from the athletic establishments and the general climate in DC, you estimate gross sales of $320,000 per year. You estimate that variable costs will be about 75% of sales. Labor, rent, utilities, and all other fixed costs run about $39,000 per year. Equipment you will need includes cash registers, a computer for keeping the books, an office safe, and 10 soccer turf fields. All that equipment will be purchased at the beginning of the project. The total cost of your equipment (including installation) is $100,000, and it will be depreciated straight-line to zero over a 4-year accounting life. After four years, you will sell the equipment for $10,000. To keep things running smoothly, you estimate that the project will require an immediate infusion of net working capital of $15,000, and you will need to retain it until you liquidate the company. Assume the tax rate is 20% and the required return (discount rate) is 15%.

1. Find the NPV, IRR, and payback for this project. Should we invest in this? 2. Would you invest in this project if the discount rate was 10%? 3. Would you invest in this project if the tax rate dropped from 40% to 20%?

	t=0	t=1	t=2	t=3	t=4
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