Aswath Damodaran 393
Duration of Disney Theme Park
Year Annual Cashflow Terminal Value Present Value Present value *t
0 - $ 2 , 000 - $ 2 , 000 $ 0
1 - $ 1 , 000 - $ 904 - $ 904
2 - $ 833 - $ 680 - $ 1 , 361
3 - $ 224 - $ 165 - $ 496
4 $ 417 $ 278 $ 1 , 112
5 $ 559 $ 337 $ 1 , 684
6 $ 614 $ 334 $ 2 , 006
7 $ 658 $ 324 $ 2 , 265
8 $ 726 $ 323 $ 2 , 582
9 $ 802 $ 322 $ 2 , 899
10 $ 837 $ 9 , 857 $ 3 , 882 $ 38 , 821
$ 2 , 050 $ 48 , 609
Duration = 48609 / 2050 = 23. 71 years
We have used the projected cash flows on the Disney theme park to estimate the
duration of the theme park.
This understates the duration,
Since cash flows are likely to drop if interest rates go up
Since we have arbitrarily estimated a terminal value at the end of year
9.
