29.

Consider how Smith Valley Waterfall Park Lodge could use capital budgeting to decide whether the $12,000,000 Waterfall Park Lodge expansion would be a good investment. Assume Smith Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) What is the project's IRR? Is the investment attractive? Why or why not? (Click the icon to view additional information.) Data Table The internal rate of return (IRR) of the expansion is The project is since it will earn a return than the company's 8% hurdie Number of additional skiers per day 114 skiers Average number of days per year that weather conditions allow skiing at Smith Valley 147 days Useful life of expansion (in years) 9 years Average cash spent by each skier per day 238 Average variable cost of serving each skier per day 77 Click to select your answer(s). Cost of expansion 12,000,000 Discount rate 8% 29 of 60 (51 complete) odge could use capital budgeting to decide whether nsion would be a good investment. Assume Smith estimates concerning the expansion: (Click the icon to view Present Value of $1 table (Click the icon to view Present Value of Ordinar What is the project's IRR? Is the investment attractiv ation.) More Info ansion is Assume that Smith Valley uses the straight-line depreciation method and expects the lodge expansion to have no residual value at the end of its nine-year life. The project is expected to have an average annual net cash inflow of $2,698,038. The NPV of the expansion is expected to be $4,854,643. arn a Print Done Activity Details 1 pt 29 of 60 (51 complete) TH Reference th Wat de n to Present Value of $1 Periods 1. 2% 0.980 14% 0.877 0.769 16% 0.862 1% 3% 4% 5% 6% 7% 8% 10% 12% 15% 18% 20% 9% 0.917 0.842 0.772 0.708 n to 0.962 0.952 0.907 0.864 0.823 0.935 0.909 0.826 0.751 0.683 0.621 0.893 0.990 0.980 0.971 0.961 0.971 0.943 0915 0.888 0.863 0.943 0.890 0.840 0.792 0.747 0.926 0.857 0.794 0.735 0.797 0.712 0.636 0.567 0.870 0.756 0.658 0.743 0.641 0.552 0.476 0.847 0.718 0.609 0.833 0.694 0.579 0.873 0.961 0.942 0.924 0.925 0.675 0.592 0.519 3. 0.889 0.855 0.822 0.816 0.763 0.713 of re 0.516 0.437 0.572 0.482 0.951 0.906 0.784 0.681 0 650 0.497 0.402 0 837 0.813 0.789 0.766 0.744 0.596 0.547 0.502 0.456 0.410 0.354 0.370 0.314 0.266 0.225 0.191 0.335 6. 0.942 7. 0.933 8. 0.923 6. 0.888 0.871 0.666 0.623 0.582 0 630 0.564 0.513 0.467 0.424 0.507 0.432 0.376 0.746 0.711 0.677 0.645 0.705 0.665 0.790 0.760 0.731 0.703 0.676 0.452 0.404 0.361 0.322 0.400 0.351 0.308 0.270 0 279 0 233 0.194 0.162 0.583 0 40 0460 0.422 0.327 0.284 0.247 0.305 0.853 0.837 0.820 0.627 0.592 0.558 0.263 0 500 0.463 0.914 0.544 10 0.905 0.614 0.508 0.386 0.227 0.388 0.356 0.237 0.208 0.135 0.112 0.215 0.195 0.722 0.701 0.585 0.557 0475 0.444 0 429 0.397 0.162 0.137 0.350 0.287 0.527 0.497 11 0.896 0.887 0.804 0.650 0.625 0.168 12 0.788 0.319 0.257 0.187 Vour a Print Done Activity Details nave viewed this topic on: 1 pt 29 of 60 (51 complete) Reference Present Value of Ordinary Annuity of $1 Periods 2% 0.990 0.980 1.942 2.884 1% 3% 0.971 1.913 2.829 3.808 3.717 4.580 4% 5% 0.952 1.859 7% 9% 0.917 1.759 2.577 2.531 8% 10% 12% 14% 15% 18% 0.847 16% 0870 0.862 1.605 2246 2.798 20% 0.833 1.528 2.106 2.589 2991 0.962 0.943 1.833 2.673 3.465 0.935 1.808 2624 3.387 4,100 0.926 0.909 0.893 0.877 1.647 2.322 2914 3.433 1.970 1.886 2.775 3 630 1.783 1.690 2487| 2402 3.170 1.736 1.626 1.566 2.941 2.723 2.283 2.174 3.902 3.546 4 329 3.312 3.240 3.037 2.855 2690 5 4.853 4.713 4.452 4212 3.993 3.890 3.791 3.605 3.352 3.274 3.127 5.795 5.601 6.472 7.652 7.325 8.162 8.983 5.417 5.242 5.076 4.917 4.767 5 582 5389 4 623 4.486 4.355 4.868 4.111 4.564 3.784 3.889 4.288 4.639 4.946 3.326 3.605 3.685 4.039 4.344 4.607 4.833 3.498 3.812 6.728 6.230 6.002 5.786 5.206 5.747 6 247 5.033 4.160 7.020 6.733 6.463 6210 6.802 7.108 7.722 | 7.360 5971 5535 5.335 5.759 4.968 4.487 4.078 4.303 4.494 3.837 4.031 4.192 8.566 7.786 7.435 6.515 5.995 5.328 4.772 10 9.471 8.530 8.111 7.024 6.710 6.418 6.145 5.650 5.216 5.019 8.760 9.385 7 499 7.943 10.368 9.787 8.306 7.887 8.384 11 9.253 7.139 6.805 7.161 6.495 6.814 4.327 5.938 6.194 5.453 5234 5.421 5.029 4.656 12 11.255 10.575 9.954 8.863 7.536 5.660 5.197 4.793 4.439 Print Done Activity Details nave viewed this topic