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 250 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 $4.00 and it will be increased by 5% per year. The variable cost per rider will be $1.40 and inflation is expected to be 3% per year, and total fixed costs will be $240,000 per year. After six years, the ride will be dismantled at a cost of $75,000 and the parts will be sold for $650,000. 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. Should the Ocean City Water Park proceed with this project? Why or Why not? 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 250 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 $4.00 and it will be increased by 5% per year. The variable cost per rider will be $1.40 and inflation is expected to be 3% per year, and total fixed costs will be $240,000 per year. After six years, the ride will be dismantled at a cost of $75,000 and the parts will be sold for $650,000. 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. Should the Ocean City Water Park proceed with this project? Why or Why not