Assume that Flint Valley's managers developed the following estimates concerning a planned expansion to its Spring Park Lodge (all numbers assumed): 123 159 10 Number of additional skiers per day.................. Average number of days per year that weather conditions allow skiing at Flint Valley Useful life of expansion (in years). . Average cash spent by each skier per day ........... $ Average variable cost of serving each skier per day .... $ Cost of expansion. .. .........$ Discount rate... 243 142 8,500,000 14% Consider how Flint Valley, a popular ski resort, could use capital budgeting to decide whether the $8.5 million Spring Park Lodge expansion would be a good investment. Click the icon to view the expansion estimates.) Now assume the expansion has zero residual value. Requirements 1. Will the payback period change? Explain and recalculate if necessary. 2. Will the project's ARR change? Explain and recalculate if necessary. 3. Assume Flint Valley screens its potential capital investments using the following decision criteria: maximum payback period = 5 years and minimum accounting rate of return = 8%. Will Flint Valley consider this project further or reject it? Requirement 1. Will the payback period change? Explain and recalculate if necessary. The initial payback period of 4.3 years will not change since the method does not consider any cash flows that occur after the payback period. The residual value will not affect cash flows until the end of the asset's life, so it was not considered in the original payback calculation. First enter the formula, then calculate the payback period with no residual value. (Round your answer to two decimal places.) Amount invested || Expected annual net cash inflow v = = Payback period years Requirement 2. Will the project's ARR change? Explain and recalculate if necessary. The ARR will change if the asset has no residual value. The average annual operating income will be lower since there is more depreciation expense Now let's enter the formula, then calculate the ARR with no residual value. (Round interim calculations to the nearest whole dollar. Enter your final answer as a percent rounded to two decimal places.) Accounting Average annual operating income from asset Initial investment = = rate of return %