Consider the following scenario:Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing
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Consider the following scenario:
Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years.
- Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
- Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
- What subjective factors would affect the investment decision?
You can view a present value table
here
.
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Consider the following scenario:Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing
Privacy Policy Terms of Use About Our Ads Contact Us © 2018 American InterContinental University. All Rights Reserved. Authorized Users Only.Consider the following scenario: Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.yf 5 X Q Q L Q J W K H Q H Z O L I W Z L O O F R V W D G D I R U W K H H Q W L U H G D V W K H O R G J H L V R S H Q . Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years. 1 . Assume that the beforetax required rate of return for Deer Valley is 14yb & R P S X W H W K H E H I R U H W D [ 1 3 9 R I W K H Q H Z O L I W D Q G D G Y L V H W K H P D Q D J H U V R I ‘ H H U 9 D O O H D E R X t whether adding the lift will be a profitable investment. Show calculations to support your answer. 2 . Assume that the aftertax required rate of return for Deer Valley is 8yb W K H L Q F R P H W D [ U D W H L V b, and the MACRS recovery period is 10 years. Compute the aftertax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. 3 . What subjective factors would affect the investment decision? You can view a present value table here . Your assignment will be graded in accordance with the following criteria. Click here to view the grading rubric. Accounting Coach. (2018yf Retrieved from https://www.accountingcoach.com/presentvalueofanordinary annuity/explanation/presentvalueofone Wild & Shaw, Chapters 9 & 11 There is no additional information to display at this time. Extra Credit View Assignment RubricIndividual Project Responsibility Centers and Financial Controls Tue, 8/7/18 Numeric 100 0 1 page and 1 Excel Spreadsheet Learning Materials Reading Assignment Online Deliverables: Submissions
