Question
You are assessing the viability of operating an amusement park. The nominal revenues from ticket sales at the end of Year 1 will be $554176.
You are assessing the viability of operating an amusement park. The nominal revenues from ticket sales at the end of Year 1 will be $554176. They will increase by 4% per year in real terms. The only annual cost will be to lease the whole operation for $118845 per year. The leasing costs are nominal and will start at the end of Year 1. They will stay fixed in nominal terms.
Assume the inflation rate is 5% and the real discount rate is 10%. All cash flows occur at year-end. The company will not pay any taxes. The business will continue into perpetuity.
What is the NPV of the project?
Select one:
a. $6921840
b. $8029703
c. $9139137
d. $8940472
e. $8267772
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Introduction to Governmental and Not for Profit Accounting
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