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Consider how Rouse Valley Snow Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment.

Consider how Rouse Valley Snow Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment. Assume

Rouse Valley's managers developed the following estimates concerning the expansion:

Number of additional skiers per day. . . . . . . . . . . . . . .121

Average number of days per year that weather conditions allow skiing at Rouse Valley. . . . . . .150

Useful life of expansion (in years). . . . . . . . . . . . . . . . . . .11

Average cash spent by each skier per day. . . . . . . . . . .$244

Average variable cost of serving each skier per day. . . .$79

Cost of expansion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$12,000,000

Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8%

Requirements

1. Compute the average annual net cash inflow from the expansion.

2. Compute the average annual operating income from the expansion.

round to the nearest dollar

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