Hoosier Corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into a new market, Hoosiersville. There are several projects the CEO considers investing in to capture the values brought by the market. One project for consideration is an improvement to the existing amusement park in Hoosierville. If the project gets approved, the company expects an annual sale of $19.6 million from ticket sales, food, and concessions at the park, with an expected growth of 2.5% annually for a project life of 8 years. The annual operating expenses are expected to be 34% of sales, and the working capital (needed immediately) is expected to be 10% of the next year’s sales. The Tax Rate is 21% In addition, the CEO determines that the new park will need to buy a new rollercoaster which will have a $3 million upfront cost. The rollercoaster will be depreciated straight-line for eight years to an expected salvage value of $0. What will be the total cash flows in year 3?

Hoosier Corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into a new market, Hoosiersville. There are several projects the CEO considers investing in to capture the values brought by the market. One project for consideration is an improvement to the existing amusement park in Hoosierville. If the project gets approved, the company expects an annual sale of $19.6 million from ticket sales, food, and concessions at the park, with an expected growth of 2.5% annually for a project life of 8 years. The annual operating expenses are expected to be 34% of sales, and the working capital (needed immediately) is expected to be 10% of the next year’s sales. The Tax Rate is 21% In addition, the CEO determines that the new park will need to buy a new rollercoaster which will have a $3 million upfront cost. The rollercoaster will be depreciated straight-line for eight years to an expected salvage value of $0. What will be the total cash flows in year 3?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1EB: Margos Memories, a company that specializes in photography and creating family and group photo...

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