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Reggie Redbird, the CEO of University Park Minivans, Inc. believes that the firm could create additional value by adding golf carts to its product...
Reggie Redbird, the CEO of University Park Minivans, Inc. believes that the firm could create additional value by adding golf carts to its product mix. Machinery used in producing the golf carts would cost $4,100,000. According to Redbird's projections, the subsequent net cash flows the company would generate for the investors if it entered the golf cart business would be $990,000 per year for 12 years. These are the only cash flows expected. The firm's annual weighted average cost of capital for a project of this type is 9.2%. QUESTION: What is the NET PRESENT VALUE (NPV) of the golf cart project?
