Page 12 - CIMA May 18 - MCS Day Tasks
P. 12
CIMA MAY 2018 – MANAGEMENT CASE STUDY
Attachment:
NPV of potential Midwest airport project
C$m C$m C$m
Year 0 1 2
Airport purchase cost - 100.00
Airport sale value 105.00
Legal costs - 2.00 - 5.00 - 8.00
Airport operating costs - 5.00 - 5.00
Airport revenues 6.50 6.50
Total relevant cash flows - 102.00 - 3.50 98.50
Discount factor 15% (current WACC) 1.000 0.870 0.756
Present values - 102.00 - 3.05 74.47
Total present value - 30.58
Net annual bus operating cash flows from year 2 15.00
perpetuity factor 6.667
discount factor 0.870
Present value of cash flow from bus operations 87.00
Total present value 56.42
Notes
Assumed that bus routes taken over at start of year 2
28 KAPLAN PUBLISHING
