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Homework: Homework 7 - Chapter 12 Save Score:67 of 10 pts 4 1 of 1 (1 complete) HW Score:67%, 6. (Click the icon to view the expansion estimates.)...
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This problem is from ACG 3301 Accounting. I need to find:

  1. What is the​ project's NPV? Is the investment​ attractive? Why or why​ not?
  2. Assume the expansion has no residual value. What is the​ project's NPV? Is the investment still​ attractive? Why or why​ not?  



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Homework: Homework 7 - Chapter 12
Save
Score: 6.67 of 10 pts
4
1 of 1 (1 complete)
HW Score: 66.67%, 6.67 of 10 pts
E12-52B (similar to)
Question Help
Consider how Cherry Valley, a popular ski resort, could use capital budgeting to decide whether the $10 million Brook Park Lodge expansion would be a good investment.
(Click the icon to view the expansion estimates.)
(Click the icon to view the present value annuity factor table.)
(Click the icon to view the present value 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 requirements.
Requirement 1. What is the project's 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 $
Screen Shot 2020-07-04 at 10.26.26 AM.png
i
Data Table
X
Assume that Cherry Valley's managers developed the following
estimates concerning a planned expansion to its Brook Park Lodge (all
numbers assumed):
Number of additional skiers per day . . . . . .
121
Average number of days per year that weather
conditions allow skiing at Cherry Valley
. .
163
Useful life of expansion (in years). . . . . . . . . .
10
Average cash spent by each skier per day . . . . . .
$
246
Average variable cost of serving each skier per day . . . .
136
Cost of expansion. . . . .
.. $ 10,000,000
Discount rate. .
12%
Assume that Cherry Valley uses the straight-line depreciation method
and expects the lodge expansion to have a residual value of $600,000
at the end of its ten-year life. It has already calculated the average
annual net cash inflow per year to be $2, 169,530.
Print
Done
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Screen Shot 2020-07-04 at 10.26.40 AM.png
Screen Shot 2020-07-04 at 10.26.54 AM.png
Screen Shot 2020-07-04 at 10.27.02 AM.png
1
Requirements
X
1. What is the project's NPV? Is the investment attractive? Why or why not?
2. Assume the expansion has no residual value. What is the project's NPV? Is
the investment still attractive? Why or why not?
Print
Done

Step-by-step answer

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