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A corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into
A corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into a new market, Hoosiersville. There are several projects the CEO considers investing in to capture the values brought by the market. One project for consideration is an improvement to the existing amusement park in Hoosierville.
If the project gets approved, the company expects an annual sale of $ million from ticket sales, food, and concessions at the park, with an expected growth of annually. The annual operating expenses are expected to be of sales, and the working capitalneeded immediately is expected to be of thenext yearssales
In addition, the CEO determines that the new park will need to buy a new rollercoaster which will have a $ million upfront cost. The rollercoaster will be depreciated straightline for eight years and is expected to have a salvage value of $ based on the accounting department's best estimatewhen purchasing the rollercoaster.
If the company will be able to sell the roller coaster for $ at the end of the project,what will be the net cash flow from the disposal of the roller coaster in year
Assume the corporate tax rate is and the remaining networking capital can be recovered at the end of the project.
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