DragonFlights, Inc. is planning on purchasing a new flying dragon for their new route to Volantis. The cost of the dragon is $10.3 million. On average the dragons are operational for about 10 years. They believe that the new route will produce them positive operating cash flows of $2,650,000 per year for the next 10 years.

DragonFlights is currently financed with equity and debt. They have 1 million shares outstanding and trading at a price of $113 per share. Stock beta is 2.4 as dragon flying business is quite risky business. They also have bonds outstanding in the total amount of $50 million in book value. Bonds are trading at premium with 115% of par value. Bonds have 20 years to maturity and have a coupon rate of 14%, with coupon paid out semi-annually. Current risk free rate is 4% and market risk premium is 7%. Marginal tax rate is 25%.

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What are the downsides or risks related to this projects, that need to be considered regardless of your recommendation?