It is 2013 and you have been hired as the financial analyst for Wild Bill's Really Wild Adventure. The economy is picking up and Wild Bill's Really Wild Adventure is going to reconvene the investors to revisit the ideal of the island resort that was put on hold as a result of the "Great Recession."

Updated information includes:

• The park will open in 2015
• Upfront investment is now $37 million, to be made at the end of 2014
• Fixed Costs are $5.5M and are expected to rise 5% per year
• Demand is expected to start at 900 visitors, growing 75 a year until it levels out at 1,500
• Variable cost is $38,000 per visit
• The park expects to charge $46,000
• The discount rate is 17%

Do your work on the worksheet labeled 2013 Analysis and answer the following within the spreadsheet:

• What is the calculated NPV?
• Should the project go forward? Explain why or why not.
• Assuming a growth of 100 visitors per year with no cap, how many visitors does the park need to attract in the first year to have a positive NPV?
• What input levers would you suggest the park focus on to ensure a positive NPV?

Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 1,000 1,100 1,200 1,300 1,400 1,500 1,525 1,550 1,575 1,600 1,625 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) $9,237,028 's Adventure. 2009 2010 2011 2012 2013 2014 2015 1,000 1,100 1,200 1,300 1,400 1,500 1,525 45,000,000 49,500,000 54,000,000 58,500,000 63,000,000 67,500,000 68,625,000 5,000,000 35,000,000 40,000,000 5,150,000 38,500,000 43,650,000 5,304,500 42,000,000 47,304,500 5,463,635 45,500,000 50,963,635 5,627,544 49,000,000 54,627,544 5,796,370 52,500,000 58,296,370 5,970,261 53,375,000 59,345,261 5,000,000 5,850,000 6,695,500 7,536,365 8,372,456 9,203,630 9,279,739 2016 2017 2018 2019 1,550 1,575 1,600 1,625 69,750,000 70,875,000 72,000,000 73,125,000 6,149,369 54,250,000 60,399,369 6,333,850 55,125,000 61,458,850 6,523,866 56,000,000 62,523,866 6,719,582 56,875,000 63,594,582 9,350,631 9,416,150 9,476,134 9,530,418 Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 625 600 610 735 895 1,000 1,025 1,050 1,075 1,100 1,125 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) ($16,832,838) 's Adventure. 2009 2010 2011 2012 2013 2014 2015 625 600 610 735 895 1,000 1,025 28,125,000 27,000,000 27,450,000 33,075,000 40,275,000 45,000,000 46,125,000 5,000,000 21,875,000 26,875,000 5,150,000 21,000,000 26,150,000 5,304,500 21,350,000 26,654,500 5,463,635 25,725,000 31,188,635 5,627,544 31,325,000 36,952,544 5,796,370 35,000,000 40,796,370 5,970,261 35,875,000 41,845,261 1,250,000 850,000 795,500 1,886,365 3,322,456 4,203,630 4,279,739 2016 2017 2018 2019 1,050 1,075 1,100 1,125 47,250,000 48,375,000 49,500,000 50,625,000 6,149,369 36,750,000 42,899,369 6,333,850 37,625,000 43,958,850 6,523,866 38,500,000 45,023,866 6,719,582 39,375,000 46,094,582 4,350,631 4,416,150 4,476,134 4,530,418 Assignment: Update the 2008 model with 2013 information Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 625 600 610 735 895 1,000 1,025 1,050 1,075 1,100 1,125 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 17% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) ($18,176,561) 's Adventure. 2009 2010 2011 2012 2013 2014 2015 625 600 610 735 895 1,000 1,025 28,125,000 27,000,000 27,450,000 33,075,000 40,275,000 45,000,000 46,125,000 5,000,000 21,875,000 26,875,000 5,150,000 21,000,000 26,150,000 5,304,500 21,350,000 26,654,500 5,463,635 25,725,000 31,188,635 5,627,544 31,325,000 36,952,544 5,796,370 35,000,000 40,796,370 5,970,261 35,875,000 41,845,261 1,250,000 850,000 795,500 1,886,365 3,322,456 4,203,630 4,279,739 2016 2017 2018 2019 1,050 1,075 1,100 1,125 47,250,000 48,375,000 49,500,000 50,625,000 6,149,369 36,750,000 42,899,369 6,333,850 37,625,000 43,958,850 6,523,866 38,500,000 45,023,866 6,719,582 39,375,000 46,094,582 4,350,631 4,416,150 4,476,134 4,530,418 Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 1,000 1,100 1,200 1,300 1,400 1,500 1,525 1,550 1,575 1,600 1,625 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) $9,237,028 's Adventure. 2009 2010 2011 2012 2013 2014 2015 1,000 1,100 1,200 1,300 1,400 1,500 1,525 45,000,000 49,500,000 54,000,000 58,500,000 63,000,000 67,500,000 68,625,000 5,000,000 35,000,000 40,000,000 5,150,000 38,500,000 43,650,000 5,304,500 42,000,000 47,304,500 5,463,635 45,500,000 50,963,635 5,627,544 49,000,000 54,627,544 5,796,370 52,500,000 58,296,370 5,970,261 53,375,000 59,345,261 5,000,000 5,850,000 6,695,500 7,536,365 8,372,456 9,203,630 9,279,739 2016 2017 2018 2019 1,550 1,575 1,600 1,625 69,750,000 70,875,000 72,000,000 73,125,000 6,149,369 54,250,000 60,399,369 6,333,850 55,125,000 61,458,850 6,523,866 56,000,000 62,523,866 6,719,582 56,875,000 63,594,582 9,350,631 9,416,150 9,476,134 9,530,418 Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 625 600 610 735 895 1,000 1,025 1,050 1,075 1,100 1,125 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) ($16,832,838) 's Adventure. 2009 2010 2011 2012 2013 2014 2015 625 600 610 735 895 1,000 1,025 28,125,000 27,000,000 27,450,000 33,075,000 40,275,000 45,000,000 46,125,000 5,000,000 21,875,000 26,875,000 5,150,000 21,000,000 26,150,000 5,304,500 21,350,000 26,654,500 5,463,635 25,725,000 31,188,635 5,627,544 31,325,000 36,952,544 5,796,370 35,000,000 40,796,370 5,970,261 35,875,000 41,845,261 1,250,000 850,000 795,500 1,886,365 3,322,456 4,203,630 4,279,739 2016 2017 2018 2019 1,050 1,075 1,100 1,125 47,250,000 48,375,000 49,500,000 50,625,000 6,149,369 36,750,000 42,899,369 6,333,850 37,625,000 43,958,850 6,523,866 38,500,000 45,023,866 6,719,582 39,375,000 46,094,582 4,350,631 4,416,150 4,476,134 4,530,418 Assignment: Update the 2008 model with 2013 information Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs Number of Visitors per Years D 2015 D 2016 D 2017 D 2018 D 2019 D 2020 D 2021 D 2022 D 2023 Variable Cost Price Per Vist Discount Rate 37,000,000 5,500,000 5% 900 975 1,050 1,125 1,200 1,275 1,350 1,425 1,500 38,000 46,000 17% Year Formula/Output: 2013 2014 Demand Revenue Initial Investment 37,000,000 Fixed Costs Variable Costs Total Costs 37,000,000 CashFlow NPV (37,000,000) ($25,506,399) The Project should not go ahead since the NPV is negative. Only projects with p Number of customers year 1 to make NPV positive 2015 Cashflow Incremental cash flow Incremental Variable costs Net Cashflow NPV (11,346,104) Customers to be attracted in the first year to break even = Since we are looking for the number of visitors to make NPV positive, then the n Input levers: 1. Increase the price per visit. If the price per visit is increased, then the revenue 2. Reduce the fixed and variable costs. Any unnecessary fixed costs should be sig 3. Engage in thorough marketing of the wild adventure such that the number of 's Adventure. 2015 2016 2017 2018 2019 2020 900 975 1,050 1,125 1,200 1,275 41,400,000 44,850,000 48,300,000 51,750,000 55,200,000 58,650,000 5,500,000 34,200,000 39,700,000 5,775,000 37,050,000 42,825,000 6,063,750 39,900,000 45,963,750 6,366,938 42,750,000 49,116,938 6,685,284 45,600,000 52,285,284 7,019,549 48,450,000 55,469,549 1,700,000 2,025,000 2,336,250 2,633,063 2,914,716 3,180,451 2019 2020 PV is negative. Only projects with positive NPV should be undertaken. 2016 2017 2018 25,653,896 2,025,000 1,150,000 (950,000) 2,225,000 2,336,250 1,150,000 (950,000) 2,536,250 2,633,063 1,150,000 (950,000) 2,833,063 2,914,716 1,150,000 (950,000) 3,114,716 3,180,451 1,150,000 (950,000) 3,380,451 break even = 1,418 ors to make NPV positive, then the number of customers will be (1,418 +1) = 1,419 customers r visit is increased, then the revenues will increase thus improving the net cash flows unnecessary fixed costs should be significantly reduced to reduce the total costs thus improving the cashflows adventure such that the number of visits may increase significantly. This will boost the firm's revenue. 2021 2022 2023 1,350 1,425 1,500 62,100,000 65,550,000 69,000,000 7,370,526 51,300,000 58,670,526 7,739,052 54,150,000 61,889,052 8,126,005 57,000,000 65,126,005 3,429,474 3,660,948 3,873,995 2021 2022 2023 3,429,474 1,150,000 (950,000) 3,629,474 3,660,948 1,150,000 (950,000) 3,860,948 3,873,995 1,150,000 (950,000) 4,073,995 - Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 1,000 1,100 1,200 1,300 1,400 1,500 1,525 1,550 1,575 1,600 1,625 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) $9,237,028 's Adventure. 2009 2010 2011 2012 2013 2014 2015 1,000 1,100 1,200 1,300 1,400 1,500 1,525 45,000,000 49,500,000 54,000,000 58,500,000 63,000,000 67,500,000 68,625,000 5,000,000 35,000,000 40,000,000 5,150,000 38,500,000 43,650,000 5,304,500 42,000,000 47,304,500 5,463,635 45,500,000 50,963,635 5,627,544 49,000,000 54,627,544 5,796,370 52,500,000 58,296,370 5,970,261 53,375,000 59,345,261 5,000,000 5,850,000 6,695,500 7,536,365 8,372,456 9,203,630 9,279,739 2016 2017 2018 2019 1,550 1,575 1,600 1,625 69,750,000 70,875,000 72,000,000 73,125,000 6,149,369 54,250,000 60,399,369 6,333,850 55,125,000 61,458,850 6,523,866 56,000,000 62,523,866 6,719,582 56,875,000 63,594,582 9,350,631 9,416,150 9,476,134 9,530,418 Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs 30,000,000 5,000,000 3% Number of Vistors per Years D 2009 D 2010 D 2011 D 2012 D 2013 D 2014 D 2015 D 2016 D 2017 D 2018 D 2019 625 600 610 735 895 1,000 1,025 1,050 1,075 1,100 1,125 Variable Cost Price Per Vist Discount Rate Formula/Output: 35,000 45,000 15% Year 2007 2008 Demand Revenue Initial Investment Fixed Costs Variable Costs Total Costs 30,000,000 30,000,000 CashFlow NPV (30,000,000) ($16,832,838) 's Adventure. 2009 2010 2011 2012 2013 2014 2015 625 600 610 735 895 1,000 1,025 28,125,000 27,000,000 27,450,000 33,075,000 40,275,000 45,000,000 46,125,000 5,000,000 21,875,000 26,875,000 5,150,000 21,000,000 26,150,000 5,304,500 21,350,000 26,654,500 5,463,635 25,725,000 31,188,635 5,627,544 31,325,000 36,952,544 5,796,370 35,000,000 40,796,370 5,970,261 35,875,000 41,845,261 1,250,000 850,000 795,500 1,886,365 3,322,456 4,203,630 4,279,739 2016 2017 2018 2019 1,050 1,075 1,100 1,125 47,250,000 48,375,000 49,500,000 50,625,000 6,149,369 36,750,000 42,899,369 6,333,850 37,625,000 43,958,850 6,523,866 38,500,000 45,023,866 6,719,582 39,375,000 46,094,582 4,350,631 4,416,150 4,476,134 4,530,418 Assignment: Update the 2008 model with 2013 information Documentation: The purpose of this model is to calculate the NPV of investing in Wild Bill's Adventure. Inputs: Upfront Investment Annual Fixed Costs Annual Inflation Fixed Costs Number of Visitors per Years D 2015 D 2016 D 2017 D 2018 D 2019 D 2020 D 2021 D 2022 D 2023 Variable Cost Price Per Vist Discount Rate 37,000,000 5,500,000 5% 900 975 1,050 1,125 1,200 1,275 1,350 1,425 1,500 38,000 46,000 17% Year Formula/Output: 2013 2014 Demand Revenue Initial Investment 37,000,000 Fixed Costs Variable Costs Total Costs 37,000,000 CashFlow NPV (37,000,000) ($25,506,399) The Project should not go ahead since the NPV is negative. Only projects with p Number of customers year 1 to make NPV positive 2015 Cashflow Incremental cash flow Incremental Variable costs Net Cashflow NPV (11,346,104) Customers to be attracted in the first year to break even = Since we are looking for the number of visitors to make NPV positive, then the n Input levers: 1. Increase the price per visit. If the price per visit is increased, then the revenue 2. Reduce the fixed and variable costs. Any unnecessary fixed costs should be sig 3. Engage in thorough marketing of the wild adventure such that the number of 's Adventure. 2015 2016 2017 2018 2019 2020 900 975 1,050 1,125 1,200 1,275 41,400,000 44,850,000 48,300,000 51,750,000 55,200,000 58,650,000 5,500,000 34,200,000 39,700,000 5,775,000 37,050,000 42,825,000 6,063,750 39,900,000 45,963,750 6,366,938 42,750,000 49,116,938 6,685,284 45,600,000 52,285,284 7,019,549 48,450,000 55,469,549 1,700,000 2,025,000 2,336,250 2,633,063 2,914,716 3,180,451 2019 2020 PV is negative. Only projects with positive NPV should be undertaken. 2016 2017 2018 25,653,896 2,025,000 1,150,000 (950,000) 2,225,000 2,336,250 1,150,000 (950,000) 2,536,250 2,633,063 1,150,000 (950,000) 2,833,063 2,914,716 1,150,000 (950,000) 3,114,716 3,180,451 1,150,000 (950,000) 3,380,451 break even = 1,418 ors to make NPV positive, then the number of customers will be (1,418 +1) = 1,419 customers r visit is increased, then the revenues will increase thus improving the net cash flows unnecessary fixed costs should be significantly reduced to reduce the total costs thus improving the cashflows adventure such that the number of visits may increase significantly. This will boost the firm's revenue. 2021 2022 2023 1,350 1,425 1,500 62,100,000 65,550,000 69,000,000 7,370,526 51,300,000 58,670,526 7,739,052 54,150,000 61,889,052 8,126,005 57,000,000 65,126,005 3,429,474 3,660,948 3,873,995 2021 2022 2023 3,429,474 1,150,000 (950,000) 3,629,474 3,660,948 1,150,000 (950,000) 3,860,948 3,873,995 1,150,000 (950,000) 4,073,995