Question 9)

What is the operating cash flow (OCF) for year 2 of the restaurant project that White Mountain Entertainment should use in its NPV analysis of the project? White Mountain Entertainment operates a(n) skating rink. The firm is evaluating the restaurant project, which would involve opening a restaurant. During year 2, the restaurant project is expected to have relevant revenue of 647,400 dollars, relevant variable costs of 200,800 dollars, and relevant depreciation of 90,900 dollars. In addition, White Mountain Entertainment would have one source of fixed costs associated with the restaurant project. Yesterday, White Mountain Entertainment signed a deal with Blue Eagle Marketing to develop an advertising campaign for use in the restaurant project. The terms of the deal require White Mountain Entertainment to pay 38,400 dollars to Blue Eagle Blue Eagle in 2 years from today. The tax rate is 25 percent.