Now suppose the initial construction cost for a baseball park is $600 mln in year 2017, $300
Question:
Now suppose the initial construction cost for a baseball park is $600 mln in year 2017, $300 mln in year 2018, and $300 mln in year 2019 . The useful economic life of the new ballpark is 20 years, and the appropriate discount rate is 10%. Assume that the expected operating profit is $150 mln a year.
Suppose the ballpark's construction starts at the end of 2017, lasts for three years (2017-2019), and it starts generating profit in 2020 (and works for 20 years starting in 2020).
What is the Net Present Value of the ballpark? (in mln)
Note 1: Discount the first year (2017) when calculating PV, since the construction starts at the END of that year.
Note 2: Round your answer to the second decimal place: X.XX (mln)
Answer: -59.33
Need help on how they got this.
(B) Refer to the previous question. Is investing in the ballpark economically feasible?
True or False
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen