Homework Help: Management accounting

Posted by please help !!! on Sunday, May 27, 2007 at 1:22pm.

Suppose one chairlift costs $2 million and the slopes along with the lift have to be install for $1.3 million, this lift allows 300 skiers on the slopes, for 40 days out of a year. Running the lift will cost $500 a day for 200 days that the ski resort will be opened, now suppost the lift tickets cost $55 a day and the cash expenses for each skier-a-day are $5. now 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 manager 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. What subjective factors would affect the investment decision?

see my post to your earlier post

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