A consultancy company is evaluating the project of national park in the city centre.

The assessment date (time zero in your analysis) for the project is January year 2020. All values quoted are in the estimated Jan 2020 prices. Assume that the national park will last for 10 years. The national park will be sold for $50 mil when stop operating.

The national park starts operating from January 2022. It is estimated that this park would have 2 million visitors each year. The entry fee between Jan 2022 and 2025 is fixed at $5/person. The entry fee of $5/person does include a GST of $0.5. The entry fee would grow to $6/person for the remaining years of the project and it still includes the same GST of $0.5 in these years. If this entry fee is recorded in the CBA NPV calculation, it will be recorded at the end of each year.

To do the project, the project investors would need to buy 10 trucks in Jan 2020. The purchasing prices for these 10 trucks is $1 mil in total and the registration fee for using these trucks is $1 million.

The project investors will pay income tax of $50000 per year and transfer an amount of $100000 per year to the pension funds for their staffs.

Capital costs associated with the national park construction will be $20 million in Jan 2020 and $25 million in Jan 2021. Capital costs are depreciated on a straight-line basis over the life of the project.

Working capital costs are $1 million and incurred two years before the operation of the park commences.

The project investors take bank loans to get money for doing the project and they have to pay interest of $100000 per year.

It is estimated that the environmental benefit from this national park is $1.5 mil/year.

The nominal discount rate in Jan 2020 is 8%/year and the inflation rate at this time is 4%/year.

Required:

1/ Construct a spreadsheet to record all the relevant cost and benefit items of this projectand then calculate the NPV of this project from the society's perspective.

(45 marks)

2/ Construct a spreadsheet to record all the relevant cost and benefit items of this projectand then calculate the NPV of this project from the firm's perspective.

(45 marks)

3/ Would this project be recommended from the society's perspective and the firm's perspective?

(10 marks)