Note: Short Exercises S-M:9-4, S-M:9-5, and S-M:9-6 must be completed before attempting Short Exercise S-M:9-7. S-M:9-7 Using the payback and ARR methods to make capital investment decisions Refer to the Hunter Valley Snow Park Lodge expansion project in Short Exercise S-M:9-4 and your calculations in Short Exercises S-M:9-5 and S-M:9-6. Assume the expansion has zero residual value. Requirements 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place.

S-M:9-4 Calculating average annual net cash inflow and average operating income Consider how Hunter Valley Snow Park Lodge could use capital budgeting to decide whether the $11,000,000 Snow Park Lodge expansion would be a good investment. Assume Hunter Valley's managers developed the following estimates concerning the expansion: Assume that Hunter Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $600,000 at the end of its seven-year life. Requirements 1. Compute the average annual net cash inflow from the expansion. 2. Compute the average annual operating income from the expansion. Note: Short Exercise S-M:9-4 must be completed before attempting Short Exercise S-M:9-S. S-M:9-5 Using the payback method to make capital investment decisions Refer to the Hunter Valley Snow Park Lodge expansion project in Short Exercise S-M:9-4. Compute the payback for the expansion project. Round to one decimal place. Note: Short Exercise S-M:9-4 must be completed before attempting Short Exercise S-M:9-6. S-M:9-6 Using the ARR method to make capital investment decisions Refer to the Hunter Valley Snow Park Lodge expansion project in Short Exercise S-M:9-4. Calculate the ARR. Round to two decimal places. Jote: Short Exercises S-M:9-4, S-M:9-5, and S-M:9-6 must be completed before attempting Short Exercise SM.97. -M:9-7 Using the payback and ARR methods to make capital investment decisions Refer to the Hunter Valley Snow Park Lodge expansion project in Short Exercise S-M:9-4 and your calculations in Short Exercises S-M:9-5 and S-M:9-6. Assume the expansion has zero residual value. Requirements 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. 3. Assume Hunter Valley screens its potential capital investments using the followin decision criteria: Will Hunter Valley consider this project further or reject it