Responsibility Centers and Financial


This is a preview of an assignment submited on our website by a student. If you need help with this question or any assignment help, click on the order button below and get started. We guarantee quality, 100% plagiarism free work or your money back.

Order Now                                                                         Get The Asnwer Now

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years.

Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
What subjective factors would affect the investment decision?
You can view a present value table here.

Please submit your assignment.

For assistance with your assignment, please use this table your text, Web resources, and all course materials.

Your assignment will be graded in accordance with the following criteria. Click here to view the grading rubric.

Reference

Accounting Coach. (2018). Present value of 1 table (PV of 1 Table). Retrieved from https://www.accountingcoach.com/present-value-of-an-ordinary-annuity/explanation/present-value-of-one

buy custom essay


View Our Writing Samples

Do you need help with an essay or assignment writing?
Let our professionals writers assist you with research and writing.

Get Started Now
Write my Essay
View client testimonials