Homework: HW #10-Chapter 12 Score: 0 of 2 pts E12-33A (similar to) Save 9 of 9 (
ID: 2533066 • Letter: H
Question
Homework: HW #10-Chapter 12 Score: 0 of 2 pts E12-33A (similar to) Save 9 of 9 (8 complete) HW Score: 73.46%, 7.35 of 10 pts Question Help Consider how Bear Valley, a popular ski resort, could use capital budgeting to decide whether the S8 milion Blizzard Park Lodge expansion would be a good investment. ?(Click the icon to view the expansion estimates.) ? Click the icon to view the present value factor table. (Click the icon to view the present value annuity factor table.) (Click the icon to view the future value annuity factor table.) Click the icon to view the future value factor table.) Read the reguirements Requirement 1. What is the projects NPV? Is the investment attractive? Why or why not? Calculate the net present value of the expansion. (Round your answer to the nearest whole dollar. Use parentheses or a minus sign for a negative net present value.) Net present value of expansion S Data Table Assume that Bear Valley's managers developed the following estimates conceming a planned expansion to its Blizzard Park Lodge (all numbers assumed): 125 Number of additional skiers per day Average number of days per year that weather 164 conditions allow skiing at Bear Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day....S Cost of expansion. Discount rate. Assume that Bear Valley uses the straight-ine depreclation method and expects the lodge expansion to have a residual value of $500,000 at the end of its eight-year life. It has already calculated the average annual 244 144 S 8,000,000 12% net cash inflow per year to be S2,050,000. Enter any number in the edit fields and then click Check AnswerExplanation / Answer
Total inflow = 125*244*164 = 5002000
Present value of inflow = 5002000*((1-(1+R)-T)/R)
= 5002000*4.97 = 24859940
Salvage value = 500000
Present value of Salvage value = 500000* (1/(1+r)n) = 500000*(1/(1.128)) = 500000*0.404 = 202000
Outflow = 144*125*164 = 2952000
Present value of outflow = 2952000 * ((1-(1+R)-T)/R)
= 2952000 * 4.97 = 14671440
Initial investment = 8000000
NPV = 24859940+202000-14671440-8000000 = 2390442
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.