Consider how Kyler Valley Stream Park Lodge could use capital budgeting to decide whether the $11,500,000 Stream Park Lodge expansion would be a good investment Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional infomation) Read the requirements. Requirement 1. Will the payback change? Explain your answer Recalculate the payback if it changes. Round to one decimal place. Select the formula to calculate the payback period The payback will be years The residual value the computation of the payback and the payback method cash flows that occur after the payback period Datb table More info Under the assumption that the expansion would have a residual value of $850,000, the managers calculated the payback period to be 4.3 years, the ARR to be 21.89%, the average annual operating income to be $1,351,716, the average amount invested to be $6,175,000, and the average annual net cash inflow to be $2,682,966. Assume that Kyler Valley uses the straight-line depreciation method and now expects the lodge expansion to have zero residual value at the end of its eight-year life. Requirements 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. 3. Assume Kyler Valley screens its potential capital investments using the following decision criteria: Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. Select the formula to calculate the payback period. ars Amount invested Ition of the payback and the payback method Expected annual net cash inflow Expected useful life Consider how Kyler Valley Stream Park Lodge could use capital budgeting to decide whether the $11,500,000 Stream Park Lodge expansion would be a good investment. Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) Read the requirements. Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. Select the formula t riod affects. = Payback The payback will does not affect years, The residual value the computation of the payback and the payback method cash flows that occur after the EJback period Consider how Kyler Valley Stream Park Lodge could use capital budgeting to decide whether the $11,500,000 Requirement 2. Will the projeci's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. Select the formula to calculate the ARR The ARR will be % The ARR when the residual value changes to zero. The average annual operating income (numerator) will because the depreciation expense is Additionally, the average investment (denominator) is when the asset does not have a residual value Requirement 3. Assume Kyler Valley screens its potential capital investments using the following decision criteria Consider how Kyler Valley Stream Park Lodge could use capital budgeting to decide whether the $11,500,000 Requirement 2. Will the project's ARR change? Explain your answer Recalculate ARR if it changes. Round to two decimal places. Select the formula to calculate the ARR. ind MnR win The ARR income (numerator) will 10. when the residual value changes to zero. The average annual operating because the depreciation expense is Additionally, the when the asset does not have a residual value Requirement 3. Assume Kyler Valley screens its potential capital investments using the following decision criteria Will Kyler Valley consider this project further or reject it? The payback period is Since the investment further than the 4.6-year maximum, and the ARR is both decision criteria, Kyler Valley than the 16.95% minimum. to consider this investment
