# Disney wants to create a new attraction at Disneyland to capitalize on the hypesurrounding the Marvel movies. They will spend \$60 million today to build this newride. This new ride would only last for 4 years, after which they would create a newerride for the next fad. Here are the numbers for the new ride:3.Year 1Year 3Year 4Year 2\$94 million\$50 million\$50 million\$30 million\$1 million\$1 million\$25 million\$15 million\$0\$0Revenues from ride\$85 million\$40 million\$5 million\$4 millionCOGS\$10 million\$5 millionAdvertisingLost revenues fromexisting ridesIncreased sales of\$3 million\$5 million\$8 million\$10 millionmerchandiseThey will depreciate the new ride to zero over 4 years using straight-line depreciationThey anticipate that, four years from now, they could sell the ride for \$5 million. Theywill need to increase net working capital by \$12 million today, but this amount willdecrease by \$3 million each year until the end of the investment. They will also use landthat they already own for this investment; the land has a market value of \$40 million anda book value of \$10 million.Disney has a tax rate of 30% and expects a return of 11% on investments like this.Should they make this investment?

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Help please not sure how to . And also how do I set this up using excel. Pearson Corporate Finance book 4th edition stand alone by Berk.

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Step 1

In order to find out if the investment should be made in the new ide, first the cash flow for each year needs to be determined and then net present value will be calculated. IF NPV is positive, investment should be made as it would add value to the company.

First, Net Income of the company would be created for four years as follows:

Note: Depreciation = \$60 million / 4 = \$15 million each year.

Step 2

Second, Salvage value at the end of 4 years is \$5 million, whereas the book value is zero. Therefore, gain on sale of new ride is

Step 3

Third, Cash Flow statement and ...

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