Question $7$

Requirements

What is the project's NPV$?$ Is the investment attractive? Why or why not?

Assume the expansion has no residual value. What is the project's NPV$?$ Is

the investment still attractive? Why or why not?

Cost of expansion.

$$10,000,000$

Discount rate

$12\%$

Assume that Cherry Valley uses the straight$-$line depreciation method

and expects the lodge expansion to have a residual value of

$$1,000,000$ at the end of its ten$-$year life. It has already calculated the

average annual net cash inflow per year to be $$2,208,976.$