Question 5 (CFFA total of 12 marks): Jay's Amusement Park is considering the introduction of a new ride. See the relevant information below. Note that 'K' is an abbreviation for kilo. So $1k is $1,000. The unit sales is measured in tickets sold. 10 years $900k Amusement Park Ride Project Data Project life Initial construction of ride equipment Depreciation of ride equipment pa Unit sales at end of each year See Note 4. 80k $10 Sale price per unit $4 Variable cost per unit $10k Ride operator salary pa, paid in arrears $30k Annual maintenance costs 10% pa Required return on assets (WACC before tax) 30% Tax rate Note 1: The owner has detailed plans that were previously drawn up by an engineer at a cost of $60k. Market research has a been undertaken at a cost of $5k to determine a suitable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0) $20k investment into customer safety goggles (current assets) is required. These current assets will used up and replaced at the end of each year. These current assets (CA) are expensed in the variable cost per unit at the er each year, but the investment in these CA happens at the start of each year. Note 3: The owner expects this ride to attract new visitors to the park and thus increase the ticket sales for existing rides. expected increase in revenue is expected to be $300k. Note 4: The ride equipment is expected to last for 10 years with regular maintenance. However, the Tax Office only allows envipment to be depreciated straight line to zero over 9 years. Note 1: The owner has detailed plans that were previously drawn up by an engineer at a cost of $60k. Market research has also been undertaken at a cost of $5k to determine a suitable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0) $20k investment into customer safety goggles (current assets) is required. These current assets will be used up and replaced at the end of each year. These current assets (CA) are expensed in the variable cost per unit at the end of each year, but the investment in these CA happens at the start of each year. Note 3: The owner expects this ride to attract new visitors to the park and thus increase the ticket sales for existing rides. The expected increase in revenue is expected to be $300k. Note 4: The ride equipment is expected to last for 10 years with regular maintenance. However, the Tax Office only allows the equipment to be depreciated straight line to zero over 9 years. Note 5: The ride equipment can be sold to a competitor at time t=10 for $50,000 Note 6: The project will be financed entirely by equity. Provide all answers in thousands of dollars, with final answers rounded to 2 decimal places. It is not necessary to show any working. Writing the correct answer alone will score full marks. However, if you make a mistake, you will score poorly. Writing the working may allow you to score partial marks even if your final answer is wrong. Question 5a (2 marks): Find the project's Firm Free Cash Flow (FFCF) at time t = 0. ? jii UL O FE 1 A- B. I U Question 5b (3 marks): Find the project's FFCF at time t=1 2. 1 A B U I Ff jii lii Question 50 (4 marks): Find the project's FFCF at time t=10 Question 50 (4 marks): Find the project's FFCF at time t=10 7 A- B U I FE !!! QO Question 5d (3 marks): Find the NPV of the amusement park project Question 5d (3 marks): Find the NPV of the amusement park project 1 A- B U I FF !!! III *? Question 5 (CFFA total of 12 marks): Jay's Amusement Park is considering the introduction of a new ride. See the relevant information below. Note that 'K' is an abbreviation for kilo. So $1k is $1,000. The unit sales is measured in tickets sold. 10 years $900k Amusement Park Ride Project Data Project life Initial construction of ride equipment Depreciation of ride equipment pa Unit sales at end of each year See Note 4. 80k $10 Sale price per unit $4 Variable cost per unit $10k Ride operator salary pa, paid in arrears $30k Annual maintenance costs 10% pa Required return on assets (WACC before tax) 30% Tax rate Note 1: The owner has detailed plans that were previously drawn up by an engineer at a cost of $60k. Market research has a been undertaken at a cost of $5k to determine a suitable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0) $20k investment into customer safety goggles (current assets) is required. These current assets will used up and replaced at the end of each year. These current assets (CA) are expensed in the variable cost per unit at the er each year, but the investment in these CA happens at the start of each year. Note 3: The owner expects this ride to attract new visitors to the park and thus increase the ticket sales for existing rides. expected increase in revenue is expected to be $300k. Note 4: The ride equipment is expected to last for 10 years with regular maintenance. However, the Tax Office only allows envipment to be depreciated straight line to zero over 9 years. Note 1: The owner has detailed plans that were previously drawn up by an engineer at a cost of $60k. Market research has also been undertaken at a cost of $5k to determine a suitable ticket price. Both of these costs are tax deductible. Note 2: An initial (t=0) $20k investment into customer safety goggles (current assets) is required. These current assets will be used up and replaced at the end of each year. These current assets (CA) are expensed in the variable cost per unit at the end of each year, but the investment in these CA happens at the start of each year. Note 3: The owner expects this ride to attract new visitors to the park and thus increase the ticket sales for existing rides. The expected increase in revenue is expected to be $300k. Note 4: The ride equipment is expected to last for 10 years with regular maintenance. However, the Tax Office only allows the equipment to be depreciated straight line to zero over 9 years. Note 5: The ride equipment can be sold to a competitor at time t=10 for $50,000 Note 6: The project will be financed entirely by equity. Provide all answers in thousands of dollars, with final answers rounded to 2 decimal places. It is not necessary to show any working. Writing the correct answer alone will score full marks. However, if you make a mistake, you will score poorly. Writing the working may allow you to score partial marks even if your final answer is wrong. Question 5a (2 marks): Find the project's Firm Free Cash Flow (FFCF) at time t = 0. ? jii UL O FE 1 A- B. I U Question 5b (3 marks): Find the project's FFCF at time t=1 2. 1 A B U I Ff jii lii Question 50 (4 marks): Find the project's FFCF at time t=10 Question 50 (4 marks): Find the project's FFCF at time t=10 7 A- B U I FE !!! QO Question 5d (3 marks): Find the NPV of the amusement park project Question 5d (3 marks): Find the NPV of the amusement park project 1 A- B U I FF !!! III *