straing-line depr.? Consider how Smith Valley Snow Park Lodge could use capital budgeting to decide whether the $12,000,000 Brook Park Lodge expansion would be good investment. Assume Smith Valley's managers developed the following estimates concerning the expansion:
Assume that Smith Valley uses the straight-line deprecation method and expects the lodge expansion to have a residual value of $600,000 at the end of its 8-year life.
Requirements:
1. compute the average annual net cash inflow from the expansion.
2. compute the average annual operating income from the expansion.
More info:
# of additional skiers per day - 114
Average # of days/year that weather conditions allow skiing at Smith Valley - 151
Useful life of expansion (in years) - 8
Average cash spent by each skier per day - 77
cost of expansion - 12,000,000
Discount rate - 10%
Assume that Smith Valley uses the straight-line deprecation method and expects the lodge expansion to have a residual value of $600,000 at the end of its 8-year life.
Requirements:
1. compute the average annual net cash inflow from the expansion.
2. compute the average annual operating income from the expansion.
More info:
# of additional skiers per day - 114
Average # of days/year that weather conditions allow skiing at Smith Valley - 151
Useful life of expansion (in years) - 8
Average cash spent by each skier per day - 77
cost of expansion - 12,000,000
Discount rate - 10%