1. As a way to enhance his own legacy, the retiring mayor of X city is doing everything he can to acquire a professional NFL team and move them to X city. He has asked X City MBA students to provide the analysis he can use to sell it to the council and the rest of the citizens. The NFL just finished their cash flow projections for what sort of tax revenue the team could bring in way of ticket sales and complimentary income for the town. Here are their findings:
Year Cash Flow Year Cash Flow Year Cash Flow
1 80 MM 4 200 MM 7 250 MM
2 110 MM 5 220 MM 8 250 MM
3 190 MM 6 270 MM 9 250 MM
To determine the projected cost of the project, the team decided to calculate a weighted average of historical costs of like stadiums, as building costs have gone down recently. The table below shows their research and assumed weightings.
Location Year Weighting Cost
Lucas (Indianapolis) 2008 .15 $720 mil.
Cowboy (Dallas) 2009 .2 $1.15 bil
MetLife (New Jersey) 2010 .25 $1.6 bil.
Falcon (Atlanta) 2017 .4 $1.6 bil
They determined the best way to funded the project is through a bond offering. In 2017, Moody's downgraded the City to A3 and A1 and further research found that investors are currently requiring a rate 5% for City bonds. The NFL suggest the bond not extend beyond nine years.
Should the city take on this project? Support your recommendation by including the following analysis and data: Payback Period, IRR, NPV and PI.