Consider how McKnight Valley River Park Lodge could use captial budgeting to decide whether the 11,500,000 River Park lodge expansion would be a good investment.

step 1 choose the formula

step 2 use the formula to calculate AAR percentage.

Consider how McKnight Valley River Park Lodge could use capital budgeting to decide whether the $11,500,000 River Park Lodge expansion would be a good investment. Assume McKnight Valley's managers developed the following estimates concerning the expansion: ?(Click the icon to view the estimates.) Assume that McKnight Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of 5750,000 at the end of its ten-year life. The average annual operating income from the expansion is $1,387,970 and the depreciation has been calculated as $1,075,000 Calculate the ARR. Round to two decimal places. ARR Data Table Number of additional skiers per day 114 skiers Average number of days per y ear that weather conditions allow skiing at McKnight Valley Useful life of expansion (in years) Average cash spent by each skier per day Averag Cost of expansion Discount rate 145 days 10 years 236 87 11,500,000 1096 e variable cost of serving e ach skier per day Print Done