. x i Data Table 118 skiers 143 days Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Cole Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day Cost of expansion 9 years $ 239 76 s. 12,000,000 10% Discount rate Print Done More Info e Under the assumption that the expansion would have a residual value of $750,000, the managers calculated the payback period to be 4.4 years, the ARR to be 23.54%, the average annual operating income to be $1,500,462, the average amount invested to be $6,375,000, and the average annual net cash inflow to be $2,750,462. Assume that Cole Valley uses the straight-line depreciation method and now expects the lodge expansion to have zero residual value at the end of its nine-year life. jo AR AH Print Done 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. Assume Cole Valley screens its potential capital investments using the following decision criteria: 3 . -R AR Maximum payback period Minimum accounting rate of return 4.9 years 17.45 % Will Cole Valley consider this project further or reject it? Print Done Consider how Cole Valley River Park Lodge could use capital budgeting to decide whether the $12,000,000 River Park Lodge expansion would be a good investment. Assume Cole Valley's managers developed the following estimates concerning the expansion: Click the icon to view the estimates.) (Click the icon to view additional information.) Read the requirements Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes, Round to one decimal place. Select the formula to calculate the payback period. Payback The payback will be years. The residual value the computation of the payback and the payback method cash flows that occur after the payback period. es Consider how Cole Valley River Park Lodge could use capital budgeting to decide whether the $12,000,000 River Park Lodge expansion would be a good investment. Assume Cole Valley's managers developed the following estimates concerning the expansion: Click the icon to view the estimates.) (Click the icon to view additional Information.) Read the requirements Requirement 1. Will the payback chango? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. Select the formula to calculate the payback period. Payback years. Amount invested Expected annual net cash inflow Expected useful life o computation of the payback and the payback method V cash flows that occur after the payback period. Requirement 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. Select the formula to calculate the ARR. ARR The ARR wil be The ARR because the depreciation when the residual value changes to zero. The average annual operating income (numerator) wil Additionally, the average Investment (denominator) is when the asset does not have a residual value. expense is Requirement 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places Select the formula to calculate the ARR ARR % because the depreciation Amount invested Annual depreciation Average amount invested Average annual net cash inflow Average annual operating income Residual value Jual value changes to zero. The average annual operating income (numerator) will verage investment (denominator) is when the asset does not have a residual value. ens its potential capital investments using the following decision criteria: es 4.9 years Requirement 3. Assume Cole Valley screens its potential capital investments using the following decision criteria: Maximum payback period Minimum accounting rate of return 17.45% Will Cole Valley consider this project further or reject it? than the 17.45% minimum. Since the investment both decision The payback period is criteria, Cole Valley than the 49-year maximum, and the ARR is V to consider this investment further