Posted by **Charlotte Holmes** on Wednesday, May 23, 2007 at 10:26pm.

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chair lifts. 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 park will sell all 300 lift tickets on those 40 days.) Running that 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 and the added cash expenses for each skier-day are $5. The new lift has an economic life of 20 year.

1.What if 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 adding the lift to be a profitable investment

2. What if 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 adding the lift will be profitable investment.

3. What subjective factors would affect the investment decision?

## Answer This Question

## Related Questions

- ACCOUNTING - Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, ...
- accounting - Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, ...
- Management Accounting - Deer Valley Lodge, a ski resort in the Wasatch Mountains...
- Management accounting - suppose one chairlift costs $2 million and the slopes ...
- Management accounting - Suppose one chairlift costs $2 million and the slopes ...
- Managerial Accounting - a ski company plan to add five new chai500 a day for the...
- accounting - deer valley lodge adds 5 chairlifts, another costs $1.3. 300
- science - the ski lift chair at a ski report is 2560m long. on average, the ski ...
- economics - Suppose that the typical snowboarder/skier visiting Mount Unknown ...
- Algebra 1 - Can you help me set this up? Suppose you are trying to decide ...

More Related Questions