What is the total value of project

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Suppose that Disney wants to follow up on the success of Frozen, with a feature film featuring Olaf the Snowman. The movie will cost $166.00 million to produce, and the producers expect the movie to generate a cash flow of $161.00 million in the first year. After the first year, cash flows will decline to $11.00 million in year 2.

However, the movie will also create synergy within the company. Disney will build a new Olaf ride at Epcot for $37.00 million. Disney suspects that the ride will bring visitors to the park and increase merchandise sales. Disney estimates that sales will increase by $13.00 million per year in PERPETUITY. The after-tax operating margin on these sales is 50.00% for Disney.

The cost of capital for Disney is 11.00%.

If we add the PV of the side effects to the NPV, what is the total value of this project? (express in terms of millions)

Reference no: EM132698008

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