consider how midnight Valley Spring Park Lodge could use capital budgeting to decide whether to 13,500,000 spring park lodge extension would be a good investment assuming tonight and valleys managers develop the following estimates concerning the expansion.
Cansider how Mcknight valley Spring Park Lodge could use capital budgetng to docide whether the $13,500,000 Spring Park Lodge expansion would be a good investment Assume McKnight Valley's managers developed the following estifates concerning the expansion: (Click the ican to view the estimates. [Click the icon to view additional information.) Read the reguirements Requirement 1. Wil the payback change? Explain your answer. Recalculate the payback it it changes. Round to one decimal place. Seiect the formula to calculate the payback period. The payback will years. The residual value the compulation of the payback and ine paytack method cash fows that cocur afor the paytack pericd. Requirement 2. Wil the projects APR change? Explain your answor. Recalculate ARR if it changes. Round to two decimal places. Select the formula to calculate the ARR. Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. Solect the formula to calculate the payback period The payback will be. years. The residual value the computation of the payback ayd the payback method cash flows that occur after the paybock period. Requirement 2. Wi Seletet the formulat Requirement 1. Will the paybock change? Explain yout answor. Recalculate the payback at it changes. Round to-one decimal place. Select the formula to caiculate the paybock period. The peyback will The residuat value the computation of the payback and the payback method cash flows that occur after the payback penod Requirement 2. Will the projocts ARR change? Explain your antwer. Recalculate ARR it it che Select the formule to calculate the ARR. Cansider how MoKnight Valley Spring Park Lodge could use capital budgeting to decide whether the $13,500,000 Spring Park Lodge exparsion would be a gocd investment Assume Mcknight Valley's managers developed the folowing essmates concerning the expansion CClick the ioon to viow the estimanos. (Cick the icon to view addfional intormation.) Read the teguirements The ARR wil The ARA. When the residual value changes to zerb. The average annaal operating income (numerator) will because the decrociasion expense is Additionally, the average imvestment (dencminaton) is when the asset does not have a tesidual value. Requirement 3. Assume McKnight Valley screens its potential capital investmeots using the foliowing decision criberia: Wil Mckrigha Vailey consider this peoject further or reped it? The payback period is (than the 5.4year maximum, and the ARR is than the 16.05% minimum since the investment both decision eritaria, Mchorighta Valliy to consider this investment further. Consider how Mcknight Valley Spring Park Lodge could use capital budgeting to decide whether the $13,500,000 Spring Park Lodge expansion would be a good invostment. Assume Valley's managers devoloped the following estimates conceming the expansion: (Cick the icon to view the estimates.) (i) (Click the kon to view additional information) Read the regulrements. The ARR wil The ARR When the residual value changes to zero. The average annual operating income (numerator) will because the depreciation expense is Addibional denominator) is when the asset does not have a residual value. Requirem alley screens its potential capital imvestments using the following decision criteria: Maximurr changes Minimum stays the same Wil Mcknight Valley consider this project further or reject it? The payback period is than the 5.4 year maximum, and the ARR is than the 16.95% minimum Since the invesament to consider this investment further. When the residual value changes to zero. The average annual operating income (numerator) will because the depreciation axpense is ie average investment (denominator) is when the asset does not have a residual value. 3. Assume Mcknight Valley screens its potential capital invesiments using the following decision citeria: be higher be lower Valley consider this project further or reject it? yotiod is than the 5.4 -year maximum, and the ARR is than the 16.95% minimum. Since the invevsuras both decision critaria, Meknight Valley to consider this investment further. Consider how McKnight Valley Spring Park Lodge could use capitat budgeting to decide whether the S13,500,000 Spring Park Lodge expainsion would be a good invosiment Assume McKnight Valey's managen developed the following estimases concerning the expansion: (Click the ioon to view the estimatet.) (Cick the icon to view additicnal information) Read the ceouicements The APR wil The ARR when the residual value changes to zero. The average annual cperasing income (numerator) will because the depreciation expense is Additionaly, the arecage investment (denominator) is when the asset does not have a residual value. Requirement 3. Assume Mcknight Valioy screens its potential capital itvestments using the following decision criteria: Wai Mcknight Valey consider this project further or reject it? The paytack pericd is than the 5.4 year maximum, and the APR is than the 16.95% minimum. Since the investment to consider this investment forther. The ARR when the residual value changes to zero. The average annual operating income (numerator) will Additionally, the average investment (denominator) is when the asset does not have a residual value. Bhanilrnmant 3 desima Mrikinht Vallow eronane ite tments using the following decision criteria: Wili Mcknight Valley consider this project further or rej lower The payback periot is than the 5.4-year mas the same 3 than the 16.95% minimum. Since the investment to consider this imvestment further The ARR when the fesidual value changes to zero. The avorago annual operating income (numerator) will because the deprecation expense is Addfonaly, the average imvestment (denominator) is when the asset does not have a residual value. apitak invesiments usirg the following decision erteria: The payback period is. than the 5.4-year maximum, and the ARR is than the 16.95% minienum, Since the ivestment both decision criteria, Mcknight Valey to consider Pis invesiment further. The ARR when the residual value changes to zero. The average annuat operating income (numetator) will because the degrociation exerese is Additionaliy, the average investment (denominator) is when the asset does not have a residual valuo. Reguirement 3. Assume McKnight Valley screens its potential caphal imves4n owing decision crieria higher Wai Mcknight Valiey oonsider thit project further or reject it? both decision critera. Moknighe Viley to consider this imestment further. The ARRivil The AFre when the residual value changes to zero. The awwerage annual operaiting income (numerator) wil Addicionaly, the average invostment (denceninator) is when the asset does not have a residual value Requirement 3. Assume Mckinight Walley screens its potential capital investments using the following dechion criteria does not mieet Wil Mckright Valkey consider this projoct further or peject ir? meets The payback perisd is than the 5.4 year maximum, and the ARP is than the t6.95\% minumm. Simce the investrvent both deciwon criteria, Mckinghi Valey to carisider this investment further The APR when the residual valve changes to rere. The average annual covealing income (numerator) wit Additionally, the average investment (denominator) is when the asset does not have a residual valuo. Prentiramamt A Amenime Mcknight Valley screens its potential capital investments using the following decision criteria. wili not want sider this project further or reject it? will want than the 5,4 -year maximum, and the ARR is than the 16.95% minimum since the investrent to consider this investment further. More info Under the assumption that the expansion would have a residual value of $500,000, the managers calculated the payback period to be 4.8 years, the ARR to be 21.27%, the average annual operating income to be $1,489,164, the average amount invested to be $7,000,000, and the average annual net cash inflow to be $2,789,164. Assume that McKnight Valley uses the straight-line depreciation method and now expects the lodge expansion to have zero residual value at the end of its ten-year life. Data table
