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Mooby's is considering building a new theme park. After estimating the future cash flows, but before the project could be evaluated the economy picked up
Mooby's is considering building a new theme park. After estimating the future cash flows, but before the project could be evaluated the economy picked up and with that surge in the economy interest rates rose. That rise in interest rates was reflected in the required rate of return Mooby's used to evaluate new products. As a result the required rate of return for the new theme park jumped from 10.5 percent to 12 percent. If die initial outlay for the park is expected to be $240 million and the project is expected to return free cash flows of $50 million in years 1 through 5 and $70 million in years 6 and 1, what is the project's JYP Fusing die new required rate of return? How much did the project's NPV change as a result of the rise in interest rates? If the required rate of return is 10.5 percent the project's NPV is $ million. If the required rate of return is 12 percent the project's NPV is $ million. The amount of decrease in the project's NPV as a result of the rise in interest rates is $ million
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