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August 1, 2014

Homework Help: Management accounting

Posted by please help !!! on Saturday, May 26, 2007 at 8:07pm.

suppose one chairlift costs $2 million and the slopes aand the lift had to be install for $1.3 million, and the lift let 300 skiers on the slopes, for 40 days out of a year) Running the lift cost $500 a day for 200 days for the ski resort openings, now suppose the lift tickets cost $55 a day and the cash expenses for each skier-day are $5. the chairlift has an economic life span of 20 years

1. Assume before-tax required of return for the resort is 14%. Compute the before-tax NPV of the new lift and advise the managers whether to add the lift as a profitable investment.
2. Assume after-tax required of return is 8% , the income tax rate is 40% and the MACRS recovery period is 10 years. Compute after-tax NPV of the new lift and tell managers whether to add as a profitable investment.
3. Wht subjective factors would affect the investment decision?

see my post to your earlier post.

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