Two friends consider opening a driving range for golfers.They estimate such a range could generate rentals of 20,000 buckets at $3 a bucket in the first year, and expect rentals to grow at 750 buckets a year thereafter.The equipment requirements include ball dispensing machines, the ball pick-up, and the vehicle tractor that will cost $8,000, $2,000, and $8,000 respectively.The net working capital is $3,000 to start with, and is expected to grow at 5% per year.The annual fixed operating cost for balls and baskets will initially be $3,000 and is expected to grow at 5% per year.The fixed costs of leasing the land and its upkeep will be $53,000 per year.The above is an example of:
A)debt financing.
B)capital budgeting.
C)equity financing.
D)trade credit.
E)multilateral netting.

Question

Quizplus · Accepted Answer

This scenario is an example of capital budgeting, which involves evaluating and planning for significant investments or expenditures. The details provided, such as initial investment costs, expected revenue growth, and operating costs, are typical considerations in capital budgeting decisions.

Two Friends Consider Opening a Driving Range for Golfers