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### Goldbloom Corp 300000

Price: \$2.50

Goldbloom Corp. is thinking about opening a soccer camp in southern California.
To start the camp, Goldbloom would need to purchase land and build four soccer fields
and a sleeping and dining facility to house 150 soccer players. Each year, the camp would
be run for 8 sessions of 1 week each. The company would hire college soccer players as
coaches. The camp attendees would be male and female soccer players ages 12–18. Property
values in southern California have enjoyed a steady increase in value. It is expected that
after using the facility for 20 years, Goldbloom can sell the property for more than it was
originally purchased for. The following amounts have been estimated.
 Cost of land \$300,000 Cost to build soccer fields, dorm and dining facility \$600,000 Annual cash inflows assuming 150 players and 8 weeks \$940,000 Annual cash outflows \$840,000 Estimated useful life 20 years Salvage value \$1,500,000 Discount rate 8%

Instructions
(a) Calculate the net present value of the project.

(b) To gauge the sensitivity of the project to these estimates, assume that if only 125 players
attend each week, annual cash inflows will be \$800,000 and annual cash outflows
will be \$750,000. What is the net present value using these alternative estimates?

(c) Assuming the original facts, what is the net present value if the project is actually
riskier than first assumed and an 11% discount rate is more appropriate?

(d) Assume that during the first 5 years, the annual net cash flows each year were only
\$40,000. At the end of the fifth year, the company is running low on cash, so management
decides to sell the property for \$1,332,000. What was the actual internal rate of
return on the project?