Question
In another scenario, the promoters of the Madison Square Garden project have suggested that with additional expenditures on marketing and ongoing upgrades during the first
In another scenario, the promoters of the Madison Square Garden project have suggested that with additional expenditures on marketing and ongoing upgrades during the first four years of the new facilitys use, the revenue could be raised from $100 million and the facility would retain a residual value after 30 years of $4 million. They project cash flow, net of on-going investments to be as follows: Years 1- 5 = negative $50 million Years 5 10 = positive $200 million Years 11 20 = positive $250 million Years 21 30 = $100 million (due to maintenance costs) Residual market value in year 30 = $4 million They also anticipate that the increased cost of the project would raise the interest rate to 6%. How good is this investment?
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