Consider how Pine Valley, a popular ski resort, could use capital budgeting to decide whether the $9 million Autumn Park Lodge expansion would be a good investment. Explain how you came to this answer.

1.	What is the project's NPV? Is the investment attractive? Why or why not?
2.	Assume the expansion has no residual value. What is the project's NPV? Is the investment still attractive? Why or why not?

Assume that Pine Valley's managers developed the following estimates concerning a planned expansion to its Autumn Park Lodge (all numbers assumed) Number of additional skiers per day 118 Average number of days per year that weather conditions allow skiing at Pine Valley 156 Useful life of expansion (in years 10 Average cash spent by each skier per day 241 136 Average variable cost of serving each skier per day 9,000,000 Cost of expansion 12% Discount rate. Assume that Pine Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $900,000 at the end of its ten-year life. It has already calculated the average annual net cash inflow per year to be $1,932,840