Aswath Damodaran 188
Key Revenue Assumptions
Revenue estimates for the parks and resort properties (in millions)
Year Magic Kingdom Epcot II Resort Properties Total
1 $ 0 $ 0 $ 0 $ 0
2 $ 1 , 000 $ 0 $ 250 $ 1 , 250
3 $ 1 , 400 $ 0 $ 350 $ 3 , 000
4 $ 1 , 700 $ 300 $ 500 $ 4 , 250
5 $ 2 , 000 $ 500 $ 625 $ 5 , 625
6 $ 2 , 200 $ 550 $ 688 $ 6 , 563
7 $ 2 , 420 $ 605 $ 756 $ 7 , 219
8 $ 2 , 662 $ 666 $ 832 $ 7 , 941
9 $ 2 , 928 $ 732 $ 915 $ 8 , 735
10 $ 2 , 987 $ 747 $ 933 $ 9 , 242
Beyond Revenues grow 2 % a year forever
These are assumptions. Most real investments involve uncertainty about the
future, but we have to make a judgment on what we “expect” to make. These
expectations may be based upon past experience or market testing.
Note that these are not conservative or low-ball estimates. Using lower numbers
than expected (because a project is risky or because you are risk-averse) can
lead to risk being double counted.
There is an alternative approach to capital budgeting where we can estimate what
are called certainty equivalent cash flows, but the discount rate in that case would
be the riskfree rate.
Finally, note that the project continues after year 10.
