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The Golden Pond Company operates in Orlando, Florida. The firm is considering building an additional amusement park that will have a wild-water wave pool, buildings,

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The Golden Pond Company operates in Orlando, Florida. The firm is considering building an additional amusement park that will have a wild-water wave pool, buildings, and restaurants. Since all the firm's sales are for cash, the cash inflow from sales and gross revenue are identical. The firm's variable costs amount to 50% of its revenue, with 60% of these costs paid in cash and 40% paid for on credit for one year. The new investment is $200 million ($100 million in equipment and $100 million in buildings), plus $10 million investment in net working capital (mainly cash). Golden Pond will depreciate the equipment by the accelerated method (by which relatively high proportions of the assets are depreciated in early years) over four years, and the buildings will be depreciated over 31.5 years. The buildings will be placed in service in January. The annual depreciation percentages are as follows: Golden Pond estimates annual sab's at $-100 million for each of the next four yean. As a result of the new project, the after-tax cash flows from the firm's other amusement |>arks will decline by $20 million a year. The firm has already paid $25 million on an after-tax bias for research and development of the new project. The value of the buildings in the Orlando area is expected to increase to an estimated $110 million after four years of operation. The value of equipment after four years of use will be zero. Assume that the after-tax cost of capital is 15%, and the corporate tax rate is 34%. The firm use vacant land for the new attraction, and it has no alternative use for the land for the next four years. Should the company proceed with the project

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