Question 5 (CFFA total of 12 marks): Green Island Resort is considering improving its revenue to introduce a new ride in the children's play area. The relevant information on the new project is below. Note that ' k ' means kilo or 1,000 . So $720k is $720,000. The unit sales are measured in tickets sold. Note 1: The owner has detailed plans that an engineer previously drew up at the cost of $45k. In addition, market research has been undertaken at the expense of $5k to determine a reasonable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0)$30k investment into children's safety gears (current assets) is required. These current assets will be expensed and replaced at each year's end. The variable cost per unit is consumed from these current assets (CA) at the end of each year. However, these CA are invested at the beginning of each year. Note 3: The resort owner expects the new ride to attract more children to the children's play area, so the owner increases ticket sales for existing rides. The expected increase in revenue is expected to be $200k. Note 4: The new ride equipment is expected to be operated for 10 years with regular maintenance. However, the Australian Taxation Office only allows the owner to depreciate the new ride equipment to zero over 9 years using the straight-line depreciation method. Note 5: The new ride equipment is expected to sell for $90,000 at time t=10. Note 6: Equity financing is used for the new project to raise money. Provide all answers in thousands of dollars, with final answers rounded to 2 decimal places. It is not necessary to show any working process. Writing the correct answer alone will score full marks. However, if you make a mistake, you will score poorly. Writing the working process may allow you to score partial marks even if your final answer is wrong. Question 5a ( 2 marks): Find the Green Island Resort new project's Cash Flow From Assets (CFFA), also known as Firm Free Cash Flow (FFCF), at time t=0. Question 5b (3 marks): Find the Green Island Resort new project's CFFA or FFCF at time Question 5c (4 marks): Find the Green Island Resort new project's CFFA or FFCF at time t=10. Question 5d (3 marks): Find the NPV of the Green Island Resort new project. Question 5 (CFFA total of 12 marks): Green Island Resort is considering improving its revenue to introduce a new ride in the children's play area. The relevant information on the new project is below. Note that ' k ' means kilo or 1,000 . So $720k is $720,000. The unit sales are measured in tickets sold. Note 1: The owner has detailed plans that an engineer previously drew up at the cost of $45k. In addition, market research has been undertaken at the expense of $5k to determine a reasonable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0)$30k investment into children's safety gears (current assets) is required. These current assets will be expensed and replaced at each year's end. The variable cost per unit is consumed from these current assets (CA) at the end of each year. However, these CA are invested at the beginning of each year. Note 3: The resort owner expects the new ride to attract more children to the children's play area, so the owner increases ticket sales for existing rides. The expected increase in revenue is expected to be $200k. Note 4: The new ride equipment is expected to be operated for 10 years with regular maintenance. However, the Australian Taxation Office only allows the owner to depreciate the new ride equipment to zero over 9 years using the straight-line depreciation method. Note 5: The new ride equipment is expected to sell for $90,000 at time t=10. Note 6: Equity financing is used for the new project to raise money. Provide all answers in thousands of dollars, with final answers rounded to 2 decimal places. It is not necessary to show any working process. Writing the correct answer alone will score full marks. However, if you make a mistake, you will score poorly. Writing the working process may allow you to score partial marks even if your final answer is wrong. Question 5a ( 2 marks): Find the Green Island Resort new project's Cash Flow From Assets (CFFA), also known as Firm Free Cash Flow (FFCF), at time t=0. Question 5b (3 marks): Find the Green Island Resort new project's CFFA or FFCF at time Question 5c (4 marks): Find the Green Island Resort new project's CFFA or FFCF at time t=10. Question 5d (3 marks): Find the NPV of the Green Island Resort new project
