Question: The Astro World amusement park has the opportunity to expand

The Astro World amusement park has the opportunity to expand its size now (the end of year 0) by purchasing adjacent property for $250,000 and adding attractions at a cost of $550,000. This expansion is expected to increase attendance by 30 percent over projected attendance without expansion. The price of admission is $30, with a $5 increase planned for the beginning of year 3. Additional operating costs are expected to be $100,000 per year. Estimated attendance for the next five years, without expansion, is as follows:


a. What are the pretax combined cash flows for years 0 through 5 that are attributable to the park’s expansion?
b. Ignoring tax, depreciation, and the time value of money, determine how long it will take to recover (pay back) theinvestment.
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  • CreatedJanuary 24, 2013
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