Assume that the expected operating profit is 10 mln a year


You are working as an economist for the city of Portland. Suppose Portland is hoping to get an NHL team, and they compete with Seattle to attract the relocating Arizona Coyotes. Portland’s demand function for NHL tickets is : P = 200 – 0.002Q Seattle’s demand function for NHL tickets is: P = 300 – 0.002Q. d. Suppose Portland offers to partly sponsor an entirely new facility for the AZ Coyotes. iii. Suppose the initial construction cost for a temporary facility is $35 mln. The useful economic life of the new ballpark is 5 years, and the appropriate discount rate is 10%. Assume that the expected operating profit is $10 mln a year. Find the NPV of the facility. Is it economically feasible?

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Financial Management: Assume that the expected operating profit is 10 mln a year
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