? Question 3
the expansion:
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1 (Click the icon to view additional information.)
Question 4
? Question 5
What is the project's NPV (round to nearest dollar)? Is the investment attractive?
Why or why not?
Calculate the net present value of the expansion. (Enter any factor amounts to three decimal places, X.XXX. Round to the nearest whole dollar.)
Net Cash
Inflow
Annuity PV Factor PV Factor (i=8%,
(i=8%, n=11)
n=11)
Present Value
Years
? Media 3
Years 1-11 Present value of annuity
Year 11
Present value of residual value
Total PV of cash inflows
? Question 6
Year 0
Initial investment
Net present value of expansion
O Question 7
More info
Assume that Juda Valley uses the straight-line depreciation method and expects
the lodge expansion to have a residual value of $500,000 at the end of its
eleven-year life. They have already calculated the average annual net cash inflow
per year to be $2,791,360.
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X
Data table
X
Number of additional skiers per day
122 skiers
Average number of days per year that weather conditions
143 days
allow skiing at Juda Valley
Useful life of expansion (in years)
11 years
Average cash spent by each skier per day
$
246
Average variable cost of serving each skier per day
86
Cost of expansion
11,500,000
Discount rate
8%
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