Consider how Kyler Valley River Park Lodge could use capital budgeting to decide whether the $12,000,000 River Park Lodge expansion would be a goodinvestment. Assume Kyler Valley's managers developed the following estimates concerning the expansion:(Click the icon to view the estimates.)Assume that Kyler Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $850,000 at the end of itsten-year life. The average annual operating income from the expansion is $1,773,400 and the depreciation has been calculated as $1,115,000.Calculate the ARR. Round to two decimal placesARRData Table120 skiersNumber of additional skiers per dayAverage number of days per year that weather conditionsallow skiing at Kyler Valley145 daysUseful life of expansion (in years)10 years244Average cash spent by each skier per day78Average variable cost of serving each skier per day12,000,000Cost of expansion8%Discount rate

Accounting Rate of Return: Accounting rate of return is the rate which covers the cost of the amount…

Answered: Calculate the ARR. Round to two decimal…

Business

Accounting

Calculate the ARR. Round to two decimal places.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 17P

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Consider how Root Valley Waterfall Park Lodge could use capital budgeting to decide whether the $12,500,000 Waterfall Park Lodge expansion would be a good investment. Assume Root Valley's managers developed the following estimates concerning the expansion: 1(Click the icon to view the estimates.) Assume that Root Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $950,000 at the end of its eleven-year life. The average annual net cash inflow from the expansion is expected to be $2,892,254. Compute the payback for the expansion project. Round to one decimal place. (1) ÷ (2) = Payback ÷ = years 1: Data Table Number of additional skiers per day 122 skiers Average number of days per year that weather conditions allow skiing at Root Valley 151 days Useful life of expansion (in years) 11 years Average cash spent by each skier per day…
Consider how Burlington Ski Lodge could use capital budgeting to decide whether a $15,000,000 lodge expansion would be a good investment. Assume Burlington Ski Lodge's managers developed the following estimates concerning the expansion: View the estimates. Assume that Burlington Ski Lodge uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $750,000 at the end of its 10-year life. The average annual operating income from the expansion is $1,335,510 and the depreciation has been calculated as $1,425,000. Calculate the ARR. Round to two decimal places. Estimates ARR Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Burlington Ski Lodge Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skler per day Cost of expansion Discount rate $ 114 skiers 145 days 10 years 245 78 15,000,000 12% X
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