Over the past six months, Six Flags conducted a marketing study on improving their park experience. The study cost$3.00 million and the results suggested that Six Flags add a kid's only roller coaster.Suppose that Six Flags decides to build a new roller coaster for the upcoming operating season. The depreciableequipment for the roller coaster will cost $50.00 million and an additional $5.00 million to install. The equipment will bedepreciated straight-line over 20 years.The marketing team at Six Flags expects the coaster to increase attendance at the park by 5%. This translates to105,570.00 more visitors at an average ticket price of $39.00. Expenses for these visitors are about 20.00% of sales.There is no impact on working capital. The average visitor spends $21.00 on park merchandise and concessions. Theafter-tax operating margin on these side effects is 37.00%. The tax rate facing the firm is 38.00%, while the cost ofcapital is 6.00%.What is the NPV of this coaster project if Six Flags will evaluate it over a 20-year period? (Six Flags expects the firstyear project cash flow to grow at 5% per year, going forward)(Express answer in millions)SubmitAnswer format: Currency: Round to: 2 decimal places.

Given, Cost of roller coaster is $50 million Installation amount is $5 million

Answered: Over the past six months, Six Flags…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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