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You are assessing the viability of operating an amusement park. The nominal revenues from ticket sales at the end of Year 1 will be $586848. They will increase by 4% per year in real terms. The only annual cost will be to lease the whole operation for $130576 per year. The leasing costs are nominal and will start at the end of Year 1. They will stay fixed in nominal terms.

Assume the inflation rate is 5% and the real discount rate is 10%. All cash flows occur at year-end. The company will not pay any taxes. The business will continue into perpetuity.

What is the NPV of the project?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92838592

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