Q3. The Al-Hamra Company is evaluating the purchase of a stadium. The stadium would cost Al- Hamra $1 million and would be depreciated for tax purposes using straight-line over 20 years (that is, $50,000 per year). It is expected that the stadium will increase Al-Hamras revenues by $400,000 per year, but would also increase expenses by $200,000 per year. Al-Hamra would be expected to increase its working capital by $20,000 to accommodate the increased investment in ticket accounts receivable. Al-Hamra Company intends to sell the stadium to the city after ten years for $600,000. The marginal tax rate for Al-Hamra is 40%. For purposes of identifying the timing of cash flows, consider the purchase to be made at the end of 2000, the first year of operations is the year 2001, and the last year of operations is the year 2010. a) What is the initial outlay associated with starting the business? [Marks 01] b) What is the annual cash flow from operations? [Marks 02] c) What will be the terminal cash flow in year 102 [Marks 01] d) What is the net present value of the investment if the cost of capital is 10%? [Marks 01] e) What is the profitability index of this investment if the cost of capital is 10%? [Marks 01] f) Should Bowden invest in the new stadium? [Marks 01]