, Question 1 (20 Marks) The Port Saint John Water Park has
thought about buying a new log flume ride. The equipment costs
R900 000 to purchase, and installation costs an additional
R56400. The equipment has a six-year expected life and will be
depreciated using the MACRS seven-year class life.
Management anticipates 160 rides per day, with 45 riders on
average per ride. The season Will last for 130 days per year. The
ticket price per rider is expected to be R6.25 in the first year,
with an annual increase of 5%. The variable cost per rider will
be R1.75, with a total annual fixed cost of R625 000. The ride
will be dismantled after six years at a cost of R354 000, and the
parts will be sold for R700 000. The capital cost is 8.50%, and
the marginal tax rate is 25%. a. Calculate the initial outlay,
annual after-tax cash flow for each year, and the terminal cash
flow. (14) b. Calculate the NPV, IRR, and MIRR of the new
equipment. Also, indicate whether the project Question 1 (10
Marks) Given the following set of cash flows: Period Cash Flow
1 45 000 2 40 000 3 35 000 4 30 000 5 25 0
Let's break down the problem into its parts and start with
Question 1.
Question 1: Water Park Investment (20 Marks)
Part (a) Initial Outlay, Annual After-Tax Cash Flow, and
Terminal Cash Flow
1. Initial Outlay:
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