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An amusement park is considering the construction of a new roller coaster. The analysis is to be conducted from the perspective of the firm. Use
An amusement park is considering the construction of a new roller coaster. The analysis is to be conducted from the perspective of the firm. Use the information below to help you answer the remaining questions on this exam. Student Response 54. Calculate the present value of the costs of building the roller coaster. A. $4 million B. $4.5 million C. $5 million D. $5.5 million 55. Calculate the present value of the revenue stream from building the roller coaster A. $4.1 million B. $4.5 million C. $4.9 million D. $5.3 million 56. Should the firm undertake the construction of the roller-coaster? A. Yes The initial capital cost will be $3 million which must be paid immediately (i.e. at t=0). The roller coaster is expected to remain in operation for the next 20 years. Based on anticipated ridership, the amusement park expects to earn additional revenues of $500,000 per year, while operating and routine maintenance costs should be about $100,000 per year. An extensive refurbishment of the roller coaster will need to be conducted in year 10, at an anticipated cost of $1 million. At the end of the 20-year period, there will be a $1 million cost to decommission the
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