Consider how Cherry Valley, a popular ski resort, could use capital budgeting to decide whether the $ 10 million Brook Park Lodge expansion would be a good investment.

Data Table Assume that Cherry Valley's managers developed the following estimates concerning a planned expansion to its Brook Park Lodge (all numbers assumed): Number of additional skiers per day. . . . . . . . . . . ...... 119 Average number of days per year that weather .conditions allow.skiing.at. Cherry. Valley............ 162 245 Useful. life.of.expansion (in. years) Average cash.spent by. each skier.per day............. $ Average variable cost of serving each.skier. per day.... $ 132 Cost of expansion ..... ..............$ 10,000,000 14% Discount.rate .................................. Assume that Cherry 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 ten-year life. It has already calculated the average annual net cash inflow per year to be $2,178,414. Reference Reference - X Future Value of Annuity of $1 Present Value of Annuity of $1 Periods Periods | 2 2% 1.000 2.020 3.060 4.122 5.204 3% 1.000 2.030 3.091 4.184 5.309 1% 1.000 2.010 3.030 4.060 5.101 6.152 7.214 8.286 9.369 10.462 4% 1.000 2.040 3.122 4.246 5.416 5% 1.000 2.050 3.153 4.310 5.526 6% 1.000 2.060 3.184 4.375 5.637 8% 1.000 2.080 3.246 4.506 5.867 10% 1.000 2.100 3.310 4.641 6.105 12% 1.000 2.120 3.374 4.779 6.353 8% 0.926 1.783 2.577 3.312 3.993 10% 0.909 1.736 2.487 3.170 3.791 12% 0.893 1.690 2.402 3.037 3.605 | 14% 0.877 1.647 2.322 2.914 3.433 18% 0.847 1.566 2.174 | 16% 0.862 1.605 2.246 2.798 3.274 | 20% 0.833 1.528 2.106 2.589 2.991 2.690 4.329 3.127 3.326 3.605 6.308 7.434 8.583 9.755 10.950 I o ovo orawn- 6.468 7.662 8.892 10.159 11.464 6.633 7.898 9.214 10.583 12.006 6.802 8.142 9.549 11.027 12.578 6.975 8.394 9.897 11.491 13.181 7.336 8.923 10.637 12.488 14.487 7.716 9.487 11.436 13.579 15.937 to 000 8.115 10.089 12.300 14.776 17.549 14% 16% 18% 20% 1.000 1.000 1.000 1.000 2.140 2.160 2.180 2.200 3.440 3.506 3.572 3.640 4.921 5.066 5.215 5.368 6.610 6.877 7.154 7.442 8.536 8.977 9.442 9.930 10.730 11.414 12.142 12.916 13.233 14.240 15.327 16.499 16.085 17.519 19.086 20.799 19.337 21.321 23.521 25.959 23.045 25.733 28.755 32.150 27.271 30.850 34.931 39.581 32.089 36.786 42.219 48.497 37.581 43.672 50.818 59.196 43.842 51.660 60.965 72.035 91.025 115.380 146.628 186.688 181.871 249.214 342.603 471.981 530.312790.948 1,181.882 1,342.025 | 2,360.757 | 4.163.213 | 7.343.858 1% 2% 3% 4% 5% 6% 1 0.990 0.9800.971 0.962 0.952 0.943 1.970 1.942 1.913 1.886 1.859 1.833 2.941 2.884 2.829 2.775 2.723 2.673 3.902 3.808 3.717 3.630 3.546 3.465 4.853 4.713 4.580 4.452 4.212 5.795 5.601 5.417 5.242 5.076 4.917 6.728 6.472 6.230 6.002 5.786 5.582 7.652 7.325 7.020 6.733 6.463 6.210 8.566 8.162 7.786 7.435 7.108 6.802 9.471 8.983 8.530 8.111 7.722 7.360 10.368 9.787 9.253 8.760 8.3067.887 11.255 10.575 9.954 9.385 8.863 8.384 12.134 11.348 10.635 9.986 9.3948.853 13.004 | 12.106 | 11.296 | 10.563 9.899 9.295 13.865 12.849 11.938 11.118 10.380 9.712 18.046 16.351 | 14.877 13.590 12.462 11.470 22.023 19.52317.413 15.622 14.094 12.783 25.808 22.396 19.600 17.292 15.372 13.765 32.835 27.355 23.115 19.793 17.159 15.046 4.355 4.868 5.335 5.759 6.145 4.111 4.564 4.968 5.328 5.650 3.837 3.889 4.288 4.639 4.946 5.216 3.498 3.812 4.078 4.303 4.494 4.031 4.192 11.567 12.683 13.809 14.947 16.097 12.169 13.412 14.680 15.974 17.293 12.808 14.192 15.618 17.086 18.599 13.486 15.026 16.627 18.292 20.024 14.207 15.917 17.713 19.599 21.579 14.972 16.870 18.882 21.015 23.276 16.645 18.977 21.495 24.215 27.152 45.762 73.106 113.283 259.057 18.531 21.384 24.523 27.975 31.772 6.495 6.814 7.103 7.367 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 9.818 10.675 11.258 11.925 20.655 24.133 28.029 32.393 37.280 72.052 133.334 241.333 767.091 5.938 6.194 6.424 6.628 6.811 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.929 6.097 6.177 6.233 5.453 5.660 5.842 6.002 6.142 6.623 6.873 7.003 7.105 559 4.327 4.439 4.533 4.611 4.675 7.606 4.656 4.793 4.910 5.008 5.092 5.353 5.467 5.517 5.548 22.019 28.243 34.785 48.886 24.297 32.030 40.568 60.402 26.870 36.459 47.575 75.401 29.778 41.646 56.085 95.026 33.066 47.727 66.439 120.800 36.786 54.865 79.058 154.762 57.275 98.347 164.494 442.593 8.514 9.077 9.427 9.779 7.469 7.843 8.055 8.244 4.870 4.948 4.979 4.997 i Reference i Reference Future Value of $1 Present Value of $1 Periods | Periods 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 1.340 1.407 1.477 1.551 1.629 6% 1.060 1.124 1.191 1.262 1.338 8% 1.080 1.166 1.260 1.360 1.469 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 16% 1.160 1.346 1.561 1.811 2.100 2.436 2.826 3.278 3.803 4.411 18% 1.180 1.392 1.643 1.939 2.288 WN 20% 1.200 1.440 1.728 2.074 2.488 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 5% 6% 0.952 0.943 0.9070.890 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0.705 0.711 0.665 0.677 0.627 0.645 0.592 0.614 0.558 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 18% 20% 0.847 0.833 0.7180.694 0.609 0.579 0.516 0.482 0.437 0.402 0.370 0.335 0.314 0.279 0.266 0.233 0.225 0.194 0.191 0.162 1.062 1.072 1.083 1.094 1.105 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.419 1.504 1.594 1.689 1.791 1.587 1.714 1.851 1.999 2.159 1.772 1.949 2.144 2.358 2.594 2.195 2.502 2.853 3.252 3.707 2.700 3.185 3.759 4.435 5.234 2.986 3.583 4.300 5.160 6.192 12% 14% 16% 0.893 0.877 0.862 0.797 0.769 0.743 0.712 0.675 0.641 0.636 0.592 0.552 0.567 0.519 0.476 0.507 0.456 0.410 0.452 0.400 0.354 0.404 0.351 0.305 0.361 0.308 0.263 0.322 0270 0.227 0.287 0237 0.195 0.257 0.208 0.168 0.229 0.182 0.145 0.205 0.160 0.125 0.183 0.140 0.108 0.104 0.073 0.051 0.059 0.038 0.024 0.033 0.0200.012 0.0110.005 0.003 0 820 Es un I oos voor Awn 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.363 4.887 5.474 0.804 1.116 1.127 1.138 1.149 1.161 1.243 1.268 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.601 1.665 1.732 1.801 1.710 1.796 1.886 1.980 2.079 1.898 2.012 2.133 2.261 2.397 2.332 2.518 2.720 2.937 3.172 2.853 3.138 3.452 3.797 4.177 4.226 4.818 5.492 6.261 7.138 5.117 5.936 6.886 7.988 9.266 6.176 7.288 8.599 10.147 11.974 7.430 8.916 10.699 12.839 15.407 0.896 0.887 0.879 0.870 0.861 0.820 0.780 0.742 0.672 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.554 0.478 0.412 0.307 0.650 0.625 0.601 0.577 0.555 0.456 0.375 0.308 0.208 0.585 0.557 0.530 0.505 0.481 0.377 0.295 0.231 0.142 0.527 0.497 0.469 0.442 0.417 0.312 0.233 0.174 0.097 0.429 0.397 0.368 0.340 0.315 0.215 0.146 0.099 0.046 0.350 0.319 0.290 0.263 0.239 0.149 0.092 0.057 0.022 0.162 0.135 0.137 0.112 0.116 0.093 0.099 0.078 0.084 0.065 0.037 0.026 0.0160.010 0.007 0.004 0.001 0.001 1.220 1.282 1.348 1.489 1.486 1.641 1.811 2.208 1.806 2.094 2.427 3.262 2.191 2.666 3.243 4.801 2.653 3.386 4.322 7.040 3.207 4.292 5.743 10.286 4.661 6.848 10.063 21.725 6.727 10.835 17.449 45.259 9.646 17.000 29.960 93.051 13.743 26.462 50.950 188.884 19.461 40.874 85.850 378.721 27.393 62.669 143.371 750.378 38.338 95.396 237.376 1,469.772 0.673 0.610 0.552 0.453 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 V project because its NPV is 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 Is the investment attractive? Why? Without a residual value, the expansion ecause of the project's NPV. is not attractive is still attractive