The Ocean City Water Park is considering the purchase of a new log flume ride. The cost to purchase the equipment is $$1,800,000$ and it will cost an additional $$180,000$ to have it installed. The equipment has an expected life of $6$ years, and it will be depreciated using a MACRS $5-$year class life. Management expects to run about $350$ rides per day, with each ride averaging $8$ riders. The season will last for $120$ days per year. In the first year, the ticket price per rider is expected to be $$5\mathrm{.}00$ and it will be increased by $5\%$ per year. The variable cost per rider will be $$1\mathrm{.}75$ and inflation is expected to be $3\%$ per year, and total fixed costs will be $$275,000$ per year. After six years, the ride will be dismantled at a cost of $$95,000$ and the parts will be sold for $$725,000.$ The cost of capital is $12\%,$ the re$-$investment rate is $10\%$ and its marginal tax rate is $35\%.$

a$.$ Calculate the initial outlay, annual after$-$tax cash flows, and the terminal cash flow.

b$.$ Calculate the NPV$,$ IRR and MIRR

c$.$ ShouldOcean City Ride Analysis

Cost of Equipment

Installation Charge

Life in Years

MACRS Class

Riders per Ride

Rides per Day

Days per Season MACRS $\%$ year

Year $1$ Ticket Price Year $1$ Year $2$ Year $3$ Year $4$ Year $5$ Year $6$

Ticket Price Increase

Variable Cost per Rider

Annual Fixed Costs

Salvage Value

Removal Cost

WACC

Tax Rate

Reinvestment Rate

Inflation Rate

Ocean City Log Flume Operating Cash Flow Statement

Year $0$ Year $1$ Year $2$ Year $3$ Year $4$ Year $5$ Year $6$

Ticket Price

Revenue

Variable Cost

Fixed Cost

Depreciation

Pre$-$Tax Cash Flow

Taxes

Add: Depreciation

Terminal Cash Flow

After$-$Tax Cash Flows

Net Present Value

IRR

MIRR the Ocean City Water Park proceed with this project? Why or Why not?

please show in excel format!!