Management estimates increased revenue from ticket

Assignment Help Financial Management

Reference no: EM131341453

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

Reference no: EM131341453

Questions Cloud

Initial decision of what products and services to produce : Bonds may be issued through either a ________ or a ________. The initial decision of what products and services to produce has a much ________ on the profitability of the firm when compared to the ________.

The external analysis of the company begins : Once financial statements are made public, the external analysis of the company begins by. __ employer businesses (businesses that employ others besides the owners) will close within the first six years

Generic bank receives new demand deposits : 1st Generic Bank receives new demand deposits of $1.8 million. Their current reserve requirement is 6%. 1st Generic has $90,000 in vault cash and $100,000 at the the Federal Reserve that has not been invested yet. How much does the bank have availabl..

Incremental cost of going outside versus conducting survey : Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..

Management estimates increased revenue from ticket : 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. Annua..

Deductions associated with equipment for first five years : Spherical Manufacturing recently spent $12 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 25% and? Spherical's marginal corporate tax rate is 32%. What are the annual CCA deductions associa..

Compute percentage total return : Suppose a stock had an initial price of $82 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $90. Compute the percentage total return.

What is value of annual deposit : It is desired to accumulate a fund of $1000 at the end of 8 years by equal deposits at the beginning of each year. If the deposits earn interest at 8% effective but the interest can be reinvested at only 5% effective. What is the value of annual depo..

About the covariance stock : What can be said about the covariance between Stock A and Stock B? (This question has only 3 possible answer choices – no choice D and no choice E)

User Account

All Pages