Capital Investment T s26-4 Using the payback and accounting rate of return methods to make Learning object capital investment decisions Consider how Smith Valley Snow Park Lodge could use capital budgeting to decide whether the $13,500,000 Snow Park Lodge expansion would be a good investment Assume Smith Valley's managers developed the following estimates concerning the expansion: Number of additional skiers per day 117 skiers Average number of days per year that weather conditions 142 days allow skiing at Smith Valley Useful life of expansion (in years 10 years 236 Average cash spent by each skier per day 76 Average variable cost of serving each skier per day 13,500,000 Cost of expansion 10% Discount rate Assume that Smith Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of its 10-year life Requirements 1. Compute the average annual net cash inflow from the expansion Compute the average annual operating income from the expansion 2. Note: Short Exercise S26.4 must be completed before attempting Short Exercise S26.5. S26-5 Using the payback method to make capital investment decisions Learnin Refer to the Smith Valley Snow Park Lodge expansion project in Short Exercise S264. Compute the payback for the expansion project. Round to one decimal place Note: Short Exercise S26-4 must be completed before attempting Short Exercise S26-6. S26-6 Using the ARR method to make capital investment decisions Learn Refer to the Smith Valley Snow Park Lodge expansion project in Short Exercise S26-4. Calculate the ARR. Round to two decimal places