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You are building a rollercoaster at Cedar Point. The initial cost of this project is $5,600,000. It will increase revenues by 2,000,000 per year for
You are building a rollercoaster at Cedar Point. The initial cost of this project is $5,600,000. It will increase revenues by 2,000,000 per year for four years. Maintenance costs are $500,000 per year and the machine will be straight line depreciated over four years. A $200,000 immediate increase in working capital is needed, which will be recovered in full during year 4. The discount rate is 10% and the firm has a 35% marginal tax rate. Should you build the roller coaster? Justify with the NPV from the projects cash flows.
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