Assume that Disney has two park expansion opportunities, one at Disneyland in California and the other at Walt Disney World in Florida. The leadership wants to narrow them to one choice. One at Disneyland will require a much larger initial investment but provides cash flows (if successful) over a longer period of time. In addition, the longer project life at Disneyland requires additional expenditures in year 3 of the project to enhance construction throughout the projects 10-year expected life. The plan at Walt Disney World is much simpler. It spans four years, with no extra expenditures.

The cash flows for these two projects are shown below.

Year	Disneyland	Walt Disney World
0	($5,000,000)	($1,500,000)
1	2,000,000	800,000
2	2,000,000	800,000
3	-1,000,000	400,000
4	2,000,000	100,000
5	1,500,000
6	1,500,000
7	1,500,000
8	800,000
9	500,000
10	100,000

Explain the following:

1. Payback periods for each project.

2. Based on the calculated payback periods, which project appears to be the better option? What are the limitations of the payback period?

3. Assume Disney uses a 20% discount rate to evaluate the present values of the two proposals. What are the NPVs of the two projects?

4. Based on your NPV calculations, which project would you recommend to proceed with? Explain