A contemporary ballet company, Eledance, is planning on performing a new take on two classical ballets, The Nutcracker and Swan Lake, at an old Melbourne theatre in the inner suburb of Fitzroy. The producers of the ballet plan on alternating the performances of the two ballets for a combined total of 40 weeks, if possible. Given the size of the theatre and the expected seat-sales rate, the producers think they can gross $1.000.000 at the box office. The ballets will cost $400 000 to mount in the first place, and the weekly running costs are expected to be $15 000.
Assume for the NPV and IRR calculations that all funds are earned and paid, except the mounting costs, at the end of the 40 weeks. The sets and costumes are expected to realise $30 000 at the end of the run?