Consider how Preston Valley Brook Park Lodge could use capital budgeting to decide whether the $13,500,000 Brook Park Lodge expansion would be a good investment. Assume Preston Valley's managers developed the following estimates concerning the expansion: i Data Table i Requirements - X 1. Will the payback change? Explain your answer. Recalculate the payback Number of additional skiers per day 118 skiers i More Info if it changes. Round to one decimal place. Average number of days per year that weather conditions 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it allow skiing at Preston Valley 150 days changes. Round to two decimal places. Useful life of expansion (in years) 12 years 3. Assume Preston Valley screens its potential capital investments using Under the assumption that the expansion would have a residual value of Average cash spent by each skier per day $ 242 the following decision criteria: $600,000, the managers calculated the payback period to be 4.8 years, the ARR to be 24.92%, the average annual operating income to be $1,757,000, Average variable cost of serving each skier per day 82 Maximum payback period 5.1 years the average amount invested to be $7,050,000, and the average annual net 13,500,000 cash inflow to be $2,832,000. Cost of expansion Minimum accounting rate of return 16.55 % Discount rate 8% Assume that Preston Valley uses the straight-line depreciation method and Will Preston Valley consider this project further or reject it? now expects the lodge expansion to have zero residual value at the end of it twelve-year life. Print Done Print Done Print DoneSuppose White Valley is deciding whether to purchase new accounting software. The payback for the $28,575 software package is three years, and the software's expected life is nine years. White Valley's required rate of return for this type of project is 11.0%. Assuming equal yearly cash flows, what are the expected annual net cash savings from the new software? Amount invested Payback Expected annual net cash inflowUse the Present Value of $1 table to determine the present value of $1 received one year from now. Assume a 12%% interest rate. Use the same table to find the present value of $1 received two years from now. Continue this process for a total of five years. Round to three decimal places. i Reference X Present Value of $1 Periods 106 206 306 496 506 606 746 806 906 109% 120% 1456 15% 169% 189% 20% Period 1 0.990 0 980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0909 0.893 0.877 0 870 0.862 0.847 0.833 Period 2 0 980 0.961 0.943 0.925 0.907 0890 | 0.873 | 0.857 7 0.842 0 826 0.797 0.769 0.756 0.743 0.718 0.694 Period 3 0 971 0 942 0.915 0 889 0. 14 0.840 0.816 0.772 0.751 0.675 0.658 0.641 0.609 0.579 Period 4 1 0 961 0924 0.888 0.855 0.823 0792 0.763 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 Period 5 0 951 0906 0.863 0 822 0.784 0.747 10.713 0.681 0.650 0.621 0567 0.519 9 0.497 0.476 0.437 0.402 Requirements - X Period 6 0 942 0 0.837 |0.746 0.705 0.656 0.630 0.596 0.564 0.507 6 0.432 0.410 0.370 0.335 Period 7 0 933 0 871 0.813 0.760 |0. 0.711 0.665 0.623 0.583 0.547 0.513 0.452 0.400 0376 0.354 0.314 0.279 Period 8 0 923 0 853 0.789 0.677 0.627 0.582 0.540 0.502 0.467 0 0.404 0.351 0.327 0.305 0.266 0.233 Period 9 0 914 0 837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 1. What is the total present value of the cash flows received over the Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0322 0.270 0247 0.227 0.191 0.162 five-year period? Period 11 0.896 0 2 0.650 0.585 0.527 0.475 0.429 0.388 0.287 0.237 0.215 0. 0.162 0.135 2. Could you characterize this stream of cash flows as an annuity? Why Period 12 0.837 0.788 0.701 0.625 0.557 7 0.497 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0. 7 0.168 0.137 0.112 or why not? Period 13 0.879 0.7730 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.229 0.182 0163 0.145 0.116 0.093 3. Use the Present Value of Ordinary Annuity of $1 table to determine the Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0 0.160 0.141 0.125 0.099 0.078 present value of the same stream of cash flows. Compare your Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0183 0.140 0123 0.108 0.084 0.065 results to your answer to Requirement 1. Period 16 0.853 0.728 0.623 0.534 0.458 0394 0.339 0.292 2 0.218 0.163 0.123 0 107 0.093 0.071 0.054 4. Explain your findings. Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 31 0.198 0.146 0.108 0.093 0.080 0.060 01045 Period 18 0.836 0.700 0.587 0.494 0.416 0350 1 0.296 0.250 0.212 0180 0.130 |0.095 10 069 | 01051 0.038 Period 19 0.828 0.686 0.570 0.475 0.396 0331 0.277 0.232 0.194 0164 0.116 0.083 0.070 0.060 0.043 0.031 Print Done Period 20 0 820 0.673 0.554 0.456 0.377 0312 0.258 0.215 0.178 0.1490 0.104 0.073 0.061 0.051 0.037 Period 21 0.811 0.660 0.538 0.439 0.359 0294 0.242 2 0.199 0.164 0 135 0 30.064 0.053 0.044 0.031 0.022 Period 22 0.803 0.647 0.522 0.422 0.342 0.278 0.226 14 0.150 0 123 0 0.056 0.046 0.038 0.026 0.018 Period 23 0.795 0.634 0.507 0.406 0.326 0.262 0.211 0.170 0.138 0.112 0.074 0.049 0.040 0.033 0.022 0.015 Period 24 0.788 0.622 0.492 0.390 0.310 0247 0.197 0.158 0.126 0.102 0.066 0.043 0.035 0.028 0.019 0.013 Period 25 0.780 0.610 0.478 0375 0.295 0.233 0.184 0.146 0.116 0.092 0.059 0.038 0.030 0 0.016 0.010 Period 26 0.772 0 598 0.464 0.361 0.281 0 220 0.172 0.135 0.106 0.084 0.053 0.033 0.026 0.021 0.014 0.009 Period 27 0.764 0.586 0.450 0 347 0.268 0.207 0.161 0.125 5 0.098 0.076 0.047 0.029 0.023 0.018 0.011 0.007 Period 28 0.757 0574 0.437 0333 0.255 0.196 0.150 0.116 0.090 0.069 01042 0.026 0.020 0.016 0.010 0.006 Period 29 0.749 0.563 0.424 0.321 0.243 0.185 0.141 0.107 0.082 3 0.037 2 0.017 0.014 0.008 01005 Period 30 0 742 0 552 0.412 0.308 0.231 0.131 10.099 0.075 0.057 0 30.020 0.015 0.012 0.007 0.004 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.011 0.005 0.004 01003 01001 0.001 Period 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 01003 0.001 0.001 01001Ace Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $330,000 the first year, $300,000 the second year, and $230,000 each year thereafter for eight years. Compute the payback period. Round to one decimal place. The payback in years isRobertson Hardware is adding a new product line that will require an investment of $1,418,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $330,000 the first year, $270,000 the second year, and $260,000 each year thereafter for eight years. Assume the project has no residual value. Compute the ARR for the investment. Round to two places. Select the formula, then enter the amounts to calculate the ARR (accounting rate of return) for the new product line. (Round ARR to the nearest hundredth percent [two decimal places], XXX%.) Average annual operating income Average amount invested ARR %Root Co. is considering acquiring a manufacturing plant. The purchase price is $1,350,000. The owners believe the plant will generate net cash inows of$307,000 annually. It Will have to be replaced in seven years. Use the payback method to determine whether Root should purchase this plant, Round to one decimal place, Select the formula, then enter the amounts to calculate the payback period for the plant. (Round payback to one decimal place, XX.) Amount invested v 7 Expected annual net cash inow = Payback = years Consider how Cole Valley Spring Park Lodge could use capital budgeting to decide whether the $11,500,000 Spring Park Lodge expansion would be a good investment. Assume Cole Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) i Data Table - X i Requirements - X Number of additional skiers per day 121 skiers 1. Compute the average annual net cash inflow from the expansion. Average number of days per year that weather conditions 2. Compute the average annual operating income from the expansion. allow skiing at Cole Valley 143 days Useful life of expansion (in years) 10 years 247 Print Average cash spent by each skier per day $ Done Average variable cost of serving each skier per day 81 Cost of expansion 11,500,000 Discount rate 8% Assume that Cole Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $750,000 at the end of its ten-year life