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The Hannibal Homers minor league baseball club is considering an expansion of its stadium to increase capacity by 2,000 seats. Management estimates increased revenue from ticket and concession sales to be $600,000 per year for the next 5 years. The cost of expansion is $750,000, with an additional $50,000 in working capital. The working capital increase is permanent (will not be recovered after 5 years). Annual costs are expected to increase by $200,000 per year, the club's cost of capital is 14%, and its tax rate is 30%. If the stadium addition is depreciated in a straight line to a value of $0.00 over 5 years, what is the NPV of this project (rounded to the nearest dollar)? (Ignore any revenues or costs associated with a terminal value of the project after five years.)

A) $165,751

B) $1,115,751

C) $365,751

D) $315,751

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92095033

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