Consider how Hunter Valley Snow Park Lodge could use capital budgeting to decide whether the $11,000,000 Snow Park Lodge expansion would be a good investment. Assume Hunter Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information) (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 NPV (round to nearest dollar)? Is the investment attractive? Why or why not? Annuity PV Net Factor PV Factor Cash (i=10%, (i=10%, Present Years Inflow n=7) n=7) Value Years 1 Present value of -7 annuity Present value of Year 7 residual value Total PV of cash inflows Year 0 Initial investment Net present value of expansion Data table - X Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Hunter Valley Useful life of expansion (in years) Average cash spent by each skier per day 121 skiers 142 days 7 years $ 241 Average variable cost of serving each skier per day 83 Cost of expansion Discount rate 11,000,000 10% to wh Print Done Pres Valu QU More info Assume that Hunter Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $600,000 at the end of its seven-year life. They have already calculated the average annual net cash inflow per year to be $2,714,756. Print Done or hol Reference Present Value of $1 Periods 1% 2% 3% 4% 5% 6% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 Period 2 0.980 0.961 0.943 0.925 0.907 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 Period 4 0.961 0.924 0.888 0.855 0.823 0.890 7% 8% 9% 10% 12% 14% 0.935 0.926 0.917 0.909 0.893 0.877 0.873 0.857 0.842 0.826 0.797 0.769 0.816 0.794 0.772 0.751 0.712 0.675 0.792 0.763 0.735 0.708 0.683 0.636 0.592 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.567 0.519 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.507 0.456 Period 7 0.933 0.871 0.813 0.760 0.711 Period 8 0.923 0.853 0.789 0.731 0.677 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.665 0.623 0.583 0.547 0.513 0.452 0.400 0.627 0.582 0.540 0.502 0.467 0.404 0.351 0.544 0.500 0.460 0.424 0.361 0.308 0.508 0.463 0.422 0.386 0.322 0.270 Period 11 0.896 0.804 0.722 0.650 0.585 0.527 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 Period 13 0.879 0.773 0.475 0.429 0.388 0.350 0.287 0.237 0.444 0.397 0.356 0.319 0.257 0.208 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.229 0.182 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.160 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 Period 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.163 0.123 Period 17 0.844 0.714 0.605 0.513 0.436 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 Period 20 0.820 0.673 0.554 0.456 0.377 0.371 0.317 0.270 0.231 0.198 0.146 0.108 0.296 0.250 0.212 0.180 0.130 0.095 0.277 0.232 0.194 0.164 0.116 0.083 0.312 0.258 0.215 0.178 0.149 0.104 0.073 Int Period 21 0.811 0.660 0.538 0.439 0.359 0.294 Period 22 0.803 0.647 0.522 0.422 0.342 0.278 Period 23 0.795 0.634 0.507 0.406 0.326 0.262 0.242 0.226 0.211 0.199 0.164 0.135 0.093 0.064 0.184 0.150 0.123 0.083 0.056 0.170 0.138 0.112 0.074 0.049 Print Done Reference Present Value of Ordinary Annuity of $1 5% 6% 7% 8% 9% 10% 12% 14% 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 4.623 4.486 4.355 4.111 3.889 5.206 5.033 4.868 4.564 4.288 5.747 5.535 5.335 4.968 4.639 6.247 5.995 5.759 5.328 4.946 6.710 6.418 6.145 5.650 5.216 Periods 1% 2% 3% 4% Period 1 0.990 0.980 0.971 0.962 Period 2 1.970 1.942 1.913 1.886 Period 3 2.941 2.884 2.829 2.775 Period 4 3.902 3.808 3.717 Period 5 4.853 4.713 4.580 Period 6 5.795 5.601 5.417 Period 7 6.728 6.472 6.230 6.002 Period 8 7.652 7.325 7.020 6.733 Period 9 8.566 8.162 7.786 7.435 Period 10 9.471 8.983 8.530 8.111 5.242 5.076 4.917 4.767 5.786 5.582 5.389 6.463 6.210 5.971 7.108 6.802 6.515 7.722 7.360 7.024 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 Period 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.194 5.660 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.842 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 6.811 6.142 Period 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 6.265 Period 17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.120 6.373 Period 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.250 6.467 Period 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.469 6.623 Period 21 18.857 17.011 15.415 14.029 12.821 11.764 10.836 10.017 9.292 8.649 7.562 6.687 Period 22 19.660 17.658 15.937 14.451 13.163 12.042 11.061 10.201 9.442 8.772 7.645 6.743 Period 23 20.456 18.292 16.444 14.857 13.489 12.303 11.272 10.371 9.580 8.883 7.718 6.792 Get more neip Print Done