Prepare financial analysis of the two scenarios!
Le Nozze di Figaro Le Nozze di Figaro (The Marriage of Figaro) is possibly the most amous opera written by Mozart. Some of the tracks are very popular d have been used as soundtracks in very successful movies (e.g. Overture is played in "Trading Places: "Duettino- sull aria is in "Shawshank Redemption"). A group of four expert who run the firm OperaEverywhere Ltd are thinking to tup a production that should last for four years. e production implies a starting investment linked to preparing the They have to set up the staging, a starting investment of 000 that, according to the firm's custom, has to be depreciated the life of the piece. In addition, the staging will have no final but the firm will incur an extra cost 150,000 for the disposal of alue stage and materials. Moreover they planned to invest in 160,000 before the starting of the production and then to r 80,000 annual advertising running costs for the first three years f the production (they think that there is no point in advertising Le di Figaro during the last year). n terms of income, they estimate to be able to sell on average 300 s at 110 in each performance and to present 60 performances year one, 80 in years two and three, and 70 in year four. However, if agree to cap the price so that the average price is 95, then they n obtain an upfront grant from the govemment of 600,000 as well hey s to be exempted from paying taxes on the profit generated by the the volumes of sold tickets since the estimated volumes are very have already identified the orchestra, the director and the production. The change in price is expected to have no major impact lose to sold out. singers. Interestingly, while the orchestra is expected to receive a (cost 1,540,000 a year) the director and the singers have asalary that is 15%ofthe income from the sales ofthe egotiated tickets. In addition, they estimate that the artistic project will absorb working capital t hat is 10% of the change in costs in the first year. The capital will be recovered in year 5. r, the new production is not a zero cost: in order to start it, they to close down now "Die Zauberflote The Magic Flute") another popular opera by Mozart that they are currently staging. This s that they will face a reduction in the income in year one at 960,000. However, they will be able to avoid to pay salaries to the current director, singers and orchestra for an overal of 700,000. e tax rate (in the scenario with no tax exemption) is 30%. Taxes are d the following year and tax credit is reimbursed by the t. Inflation is expected to be very close to zero and, thus, can dismiss it. Everywhere incurs a cost on finance of 10%. a financial analysis of the two scenarios (free ticket price and t price cap) u can use more than one investment evaluation technique
