Question
Grouse Mountain ski resort is planning to invest $1,500,000 to buy new rental ski equipment. During the 6 year life of the equipment the projected
Grouse Mountain ski resort is planning to invest $1,500,000 to buy new rental ski equipment. During the 6 year life of the equipment the projected Net Income will be $80,000, $120,000, $140,000, $160,000, $180,000, and $200,000 in years 1 through 6 respectively. Grouse uses straight-line depreciation with no residual value at end of year 6. Opportunity cost of capital for Grouse is 7%.
a) Determine the Net Present Value of the investment (hint: use cashflow)
b)Determine the Payback Period:
c) Determine Accounting Rate of Return (ARR):
ARR = Avenue Annual Operating Income
Initial Investment
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