Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers developed the following estimates concerning the expansion (Click the icon to view the estimates ) Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of its ten-your ide The average annual operating inco from the expansion is $1413,936 and the depreciation has been calculated as $1,200,000 Calculate the ARR Round to two decimal places Average annual operating income Average amount invested ARR X
Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers developed the following estimates concerning the expansion (Click the icon to view the estimates ) Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of its ten-your ide The average annual operating inco from the expansion is $1413,936 and the depreciation has been calculated as $1,200,000 Calculate the ARR Round to two decimal places Average annual operating income Average amount invested ARR X
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 14E
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![Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers
developed the following estimates concerning the expansion
(Cack the icon to view the estimates)
Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of es ten-year life The average annual operating income
from the expansion is $1 413,936 and the depreciation has been calculated as $1,200,000
Calculate the ARR Round to two decimal places
Average annual operating income
Average amount invested
Data table
ARR
Number of additional skiers per day
Average number of days per year that weather conditions
allow skiing at Smith Valley
Useful life of expansion (in years)
Average cash spent by each skier per day
Average variable cost of serving each skier per day
Cost of expansion
Discount rate
5
118 skiers
142 days
10 years
235
79
13,000,000
10%
X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fabdc64ed-1c18-4413-b6c6-7b85b891bf9c%2F25662992-7c65-42d1-8017-0e186973d71c%2F4hgdq7l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers
developed the following estimates concerning the expansion
(Cack the icon to view the estimates)
Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of es ten-year life The average annual operating income
from the expansion is $1 413,936 and the depreciation has been calculated as $1,200,000
Calculate the ARR Round to two decimal places
Average annual operating income
Average amount invested
Data table
ARR
Number of additional skiers per day
Average number of days per year that weather conditions
allow skiing at Smith Valley
Useful life of expansion (in years)
Average cash spent by each skier per day
Average variable cost of serving each skier per day
Cost of expansion
Discount rate
5
118 skiers
142 days
10 years
235
79
13,000,000
10%
X
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