Jefferson Mountain is a small ski resort located in central Pennsylvania, In recent years, the resort has experienced two major problems: (1) unusually low annual snowfalls and (2) long lift lines. To remedy these problems, management is considering two Investment proposals. The first involves a $125,000 investment in equipment used to make artificial snow. The second involves the $180,000 purchase of a new high-speed chairlift. The most that the resort can afford to invest at this time is $200,000. Thus, it cannot afford to fund both proposals. Choosing one proposal over the other is somewhat problematic. If the resort funds the snow-making equipment, business will increase, and lift lines will become even longer than they are currently. If It funds the chairlift, lines will be shortened, but there may not be enough natural snow to attract skiers to the mountain. The following estimates pertain to each of these ivestment proposals. Snow-Making Equipment Chairlift Estimated life of investment 20 years 36 years Estimated incremental annual revenue of investment 40, eee $ 54, Estimated incremental annual expense of investment (including taxes and depreciation) 15,000 19, eee $ Neither investment is expected to have any salvage value. Furthermore, the only difference between incremental cash flow and incremental income is attributable to depreciation. Due to inherent risks associated with the ski industry and the resort's high cost of Neither investment is expected to have any salvage value. Furthermore, the only difference between incremental cash flow and incremental income is attributable to depreciation. Due to inherent risks associated with the ski industry and the resort's high cost of capital, a minimum return on investment of 20 percent is required. Use straight-line depreciation method. Required: a. Compute the payback period of each proposal (Round your answers to 1 decimal place.) Snow-Making Equipment Chairlift Payback period 4.0 years 4.5 years b. Compute the return on average investment of each proposal. (Round your answers to 2 decimal places.) Snow-Making Equipment Chairlift Return on average investment 40.00% 38.90 % d. What nonfinancial factors should be considered? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Existing chairlifts Recent weather patterns Alternative investment opportunities Corporate image Employee morale e. Which proposal, if either, do you recommend as a capital investment? Snow-Making Equipment Chairlift