Can you explain the NPV answer as well as the second requirement? Thank you.
Consider how Frost Valley, a popular ski resort, could use capital budgeting to decide whether the $9 million Brook Park Lodge expansion would be a good investment. E (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 future value annuity factor table. (Click the icon to view the present value 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 $ Is the investment attractive? Why? The expansion is an attractive project because its NPV is positive Requirement 2. Assume the expansion has no residual value. What is the project's NPV? Is the investment still attractive? Why or why not? Calculate the project's NPV. (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 $ ,082,057 Data Table Assume that Frost Valley's managers developed the following estimates concerning a planned expansion to its Brook Park Lodge (all numbers assumed]): 121 Number of additional skiers per day Average number of days per year that weather 165 10 239 144 $ 9,000,000 14% conditions allow skiing at Frost Valley Average cash spent by each skier per day . . . . . . . . . . . Average variable cost of serving each skier per day . Cost of expansion Assume that Frost Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $700,000 at the end of its ten-year life. It has already calculated the average annual net cash inflow per year to be $1,896,675 Present Value of Annuity of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 10.990 0.9800.971 0.962 0.9520.9430.9260.9090.8930.877 0.8620.847 0.833 2 1.970 1.942 1.9131.886 1.859 1.833 1.783 1.736 1.6901.647 1.605 1.566 1.528 32.9412.8842.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.246 2.174 2.106 43.9023.8083.717 3.6303.546 3.4653.312 3.170 3.037 2.9142.7982.6902.589 5 4.8534.7134.5804.452 4.3294.212 3.9933.7913.605 3.433 3.274 3.127 2.991 65.7955.6015.4175.2425.0764.9174.6234.3554.111 3.8893.6853.4983.326 76.7286.472 6.230 6.002 5.7865.5825.206 4.868 4.5644.288 4.0393.812 3.605 8 7.652 7.3257.0206.7336.463 6.210 5.7475.3354.9684.6394.344 4.078 3.837 98.5668.1627.786 7.4357.108 6.802 6.2475.7595.3284.9464.607 4.3034.031 10 9.4718.983 8.530 8.117.722 7.360 6.710 6.145 5.650 5.216 4.833 4.4944.192 11 10.3689.787 9.2538.7608.3067.8877.1396.4955.9385.4535.0294.6564.327 12 11.255 10.575 9.9549.3858.8638.3847.5366.8146.1945.6605.197 4.793 4.439 13 12.134 11.348 10.635 9.9869.3948.8537.9047.103 6.4245.842 5.342 4.9104.533 14 13.004 12.106 11.296 10.5639.8999.2958.2447.3676.6286.0025.4685.008 4.611 15 13.865 12.849 11.938 11.118 10.380 9.712 8.5597.606 6.811 6.142 5.575 5.092 4.675 20 18.046 16.351 14.87713.590 12.462 11.470 9.818 8.514 7.469 6.623 5.9295.353 4.870 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 6.097 5.4674.948 3025.808 22.39619.600 17.29215.372 13.765 11.2589.427 8.0557.003 6.177 5.517 4.979 4032.83527.355 23.115 19.793 17.159 15.046 11.925 9.7798.2447.105 6.2335.5484.997 Present Value of $1 Periods, 1% | 2% % | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 10.990 0.9800.9710.9620.9520.9430.926 0.909 0.8930.877 0.8620.847 0.833 2 0.9800.9610.9430.9250.9070.8900.8570.8260.7970.7690.7430.718 0.694 3 0.971 0.9420.9150.8890.864 0.840 0.7940.7510.712 0.6750.6410.6090.579 40.961 0.924 0.888 0.8550.823 0.792 0.735 0.683 0.6360.5920.5520.5160.482 50.9510.906 0.863 0.822 0.784 0.747 0.681 0.621 0.5670.519 0.4760.437 0.402 6 0.9420.8880.8370.7900.7460.705 0.630 0.5640.507 0.4560.410 0.370 0.335 7 0.933 0.871 0.813 0.760 0.711 0.665 0.5830.513 0.452 0.400 0.3540.3140.279 8 0.923 0.8530.7890.731 0.677 0.627 0.5400.4670.4040.3510.3050.266 0.233 9 0.914 0.837 0.7660.703 0.645 0.5920.500 0.4240.3610.3080.263 0.2250.194 10 0.9050.820 0.7440.676 0.6140.5580.463 0.3860.322 0.270 0.227 0.191 0.162 110.896 0.804 0.722 0.6500.5850.527 0.4290.350 0.287 0.237 0.195 0.162 0.135 12 0.887 0.7880.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 13 0.879 0.7730.6810.6010.5300.4690.3680.2900.2290.182 0.1450.116 0.093 140.870 0.7580.6610.5770.5050.442 0.3400.263 0.2050.160 0.1250.0990.078 15 0.861 0.743 0.642 0.5550.4810.417 0.315 0.2390.1830.140 0.108 0.084 0.065 20 0.820 0.673 0.5540.456 0.377 0.312 0.215 0.149 0.104 0.0730.0510.0370.026 250.7800.610 0.478 0.375 0.2950.2330.146 0.0920.059 0.038 0.024 0.016 0.010 30 0.742 0.5520.4120.3080.2310.1740.0990.057 0.0330.0200.0120.0070.004 40 0.672 0.453 0.307 0.2080.142 0.0970.0460.0220.011 0.005 0.0030.0010.001 | 3% | 4
