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Consider how Preston Valley Stream Park Lodge could use capital budgeting to decide whether the $12,500,000 Stream Park Lodge expansion would be a good investment
Consider how Preston Valley Stream Park Lodge could use capital budgeting to decide whether the $12,500,000 Stream Park Lodge expansion would be a good investment Assume Preston Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) Assume that Preston Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $950,000 at the end of its seven-year life. The average annual operating income from the expansion is $1,023,216 and the depreciation has been calculated as $1,650,000. Calculate the ARR. Round to two decimal places. Average amount invested Il ARR Average annual operating income 1023216 11 % x Data Table 119 skiers Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Preston Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day Cost of expansion Discount rate 144 days 7 years 239 $ 83 12,500,000 8% Print Done
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