Suppose you have been hired as a financial consultant to Disney to help analyze a new ride at Disneyland based on the Disney+ hit series, The Mandalorian." This will be a five-year project, at which point Disney will re-evaluate whether to continue the ride or change it. In secret, Disneyland purchased some land two years ago adjacent to the newly opened Star Wars area of Disneyland Resort for $12.00 million. Due to the pandemic, the current market value of the land has decreased to $9.00 million. The cost of the new attraction will be $84.00 million, and Disney will depreciate this using the five-year MACRS asset class. The fixed cost to operate the ride each year is $1.32 million. At the end of the project, Disney expects the market value of the attraction to be $20.72 million. Disney expects the new ride will increase ticket sales by 473 per day (172,645 per year) at an average ticket price of $125.00. Disney will also sell a unique Grogu (Baby Yoda) plush toy for $52.00. The per unit cost for the plush toy is $10.00 and Disney will sell a limited amount per year (77,000 units). The project will require initial net working capital of $5.00 million. The following market data is current: Debt: 6.87% coupon bonds outstanding, 16 years to maturity, selling for 97.70% of par; the bonds have a $1,000.00 par value each and make semiannual payments. Common stock: The company has a beta of 0.91 and a debt-to-equity ratio of 0.73. Market: 6.90% expected market risk premium; 2.60% risk-free rate. Disney has a tax rate of 25.00%. MACRS table 1 2 3 4 3-year class 33.33% 44.45 14.81 7.41 5-year class 20.00% 32.00 19.20 11.52 11.52 5.76 7-year class 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 5 6 7 8