e. After a long and successful career, you decide to fulfill your childhood dream and build...

 

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e. After a long and successful career, you decide to fulfill your childhood dream and build a zoo in your backyard. The set-up costs for the fences, the animals, equipment, etc. are $200,000. The operating costs, e.g. feeding the animals, etc. is $20,000 that you have to pay every year. After four years you get tired of your zoo. You release all the animals into the wild and sell the remaining equipment for $40,000. The interest rate is 10%. Draw a timeline of the cash flows i. ii. 111. [2 marks] [3 marks] What is the Present Value of your zoo project (NPV)? On the final day before closing your zoo, you open it to the public (but charge an entrance fee). How much would you have to earn in entrance fees on that day so that the present value of the whole project is zero (i.e. so you break even)? [3 marks] e. After a long and successful career, you decide to fulfill your childhood dream and build a zoo in your backyard. The set-up costs for the fences, the animals, equipment, etc. are $200,000. The operating costs, e.g. feeding the animals, etc. is $20,000 that you have to pay every year. After four years you get tired of your zoo. You release all the animals into the wild and sell the remaining equipment for $40,000. The interest rate is 10%. Draw a timeline of the cash flows i. ii. 111. [2 marks] [3 marks] What is the Present Value of your zoo project (NPV)? On the final day before closing your zoo, you open it to the public (but charge an entrance fee). How much would you have to earn in entrance fees on that day so that the present value of the whole project is zero (i.e. so you break even)? [3 marks]

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Answer Question 1 Timeline of the Cash Flows is as follows Timein Y... View the full answer