Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1-what is the project cash flow for year 0? 2-what is the project cash glow for year 1? 3-what is the NPV of this coaster

image text in transcribed
1-what is the project cash flow for year 0?
2-what is the project cash glow for year 1?
3-what is the NPV of this coaster project if Six flags will evaluate it over a 20-year period? (Six Flags expects the first year of project cash flow to grow at 5% per year, going forward)
Over the past six months, Six Flags conducted a marketing study on improving their park experience. The study cost $3.00 million and the results suggested that Six Flags add a kid's only roller coaster. Suppose that Six Flags decides to build a new roller coaster for the upcoming operating season. The depreciable equipment for the roller coaster will cost $50.00 million and an additional $5.00 million to install. The equipment will be depreciated straight-line over 20 years. The marketing team at Six Flags expects the coaster to increase attendance at the park by 5%. This translates to 113,059.00 more visitors at an average ticket price of $40.00. Expenses for these visitors are about 10.00% of sales. There is no impact on working capital. The average visitor spends $25.00 on park merchandise and concessions. The after-tax operating margin on these side effects is 34.00%. The tax rate facing the firm is 35.00%, while the cost of capital is 7.00%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions