What:

A new Star Wars experience at Disneyland using the Volume.

Using the Volume, you play a part in the Star Wars Universe. Instead of watching Star Wars, you enter the

world of Star Wars with a mix of Volume technology, animatronics, and a specialized treadmill floor.

Details:

This project has a $5-$year life and will impact the following:

Park tickets will increase by $3,500$ per day in year one and decline by $10\%$ per year for the remainder of the

project.

Park tickets are currently $$110$ and will increase by $3\%$ per year for the entire project.

Merchandise sales will increase by $$1\mathrm{.}2$ million in year $1$ and decline by $5\%.$

Cost of building the location and animatronic: $$151\mathrm{.}3$ million. $5-$year life, MACRS depreciation$\mathrm{.}1$

WACC $7\mathrm{.}25\%$

EBIT as percent of revenues will be $20\%.$

Merchandise inventories: $2\%$ of sales.

Further assumptions:

Tax rate: $25\%$

Riskiness is slightly higher than a typical Disney project $($adjust WACC up by $1\mathrm{.}5$ percentage points$).$

Assets will have BT salvage of $$2$ million.

Use the above information to solve for the following:

Year

Visitors $($per year$)$

Growth$/$Decline visitors

Ticket price growth

Ticket price

Merchandise

Growth$/$Decline

merchandise

Building and animatronic

$($BV$)$

MACRS

Depreciation

Net capital spending

cash flow

NWC $($Percent of

merchandise$)$

EBIT $($Percent of

Revenue$)$

Pro$-$forma income

statement

Revenues

Operating Expenses $($exl

Depreciation$)$

Depreciation

EBIT

Taxes

Net Income

Operating Cash Flows

Net working capital

Amount of NWC required

Change in NWC Cash

flow

Net capital spending

cash flows

Book value

BT Salvage

AT Salvage

Total net capital

spending

Net Cash Flows

Required Return

NPV

IRR