In 2014 Vail Resorts, Inc. (MTN), purchased Park City Mountain Resort for $182.5 million. Vail also announced it would invest another $115 million for resort upgrades, which included $50 million to link the Park City Mountain Resort to Vail's neighboring Canyons Resort. This would create one of the largest ski resorts in the United States, with over 7,000 acres of skiable terrain. Interestingly, the opportunity to purchase Park City Mountain Resort arose because the previous owners missed the deadline to renew their 20-year lease of the property by two days. The unexpected option to purchase the resort led top management to engage in capital budgeting analysis to see if the massive expenditure necessary for the purchase and upgrade of the Park City Mountain Resort would pay off. Instructions 1. What estimates would be needed for Vail to perform a net present value analysis of whether to buy the Park City Mountain Resort? 2. What uncertainties would Vail have to consider about these estimates? 3. What metrics are available to external stakeholders for use in assessing Vail's capital budgeting decisions?
In 2014 Vail Resorts, Inc. (MTN), purchased Park City Mountain Resort for $182.5 million. Vail also announced it would invest another $115 million for resort upgrades, which included $50 million to link the Park City Mountain Resort to Vail's neighboring Canyons Resort. This would create one of the largest ski resorts in the United States, with over 7,000 acres of skiable terrain.
Interestingly, the opportunity to purchase Park City Mountain Resort arose because the previous owners missed the deadline to renew their 20-year lease of the property by two days. The unexpected option to purchase the resort led top management to engage in capital budgeting analysis to see if the massive expenditure necessary for the purchase and upgrade of the Park City Mountain Resort would pay off.
Instructions
1. What estimates would be needed for Vail to perform a
2. What uncertainties would Vail have to consider about these estimates?
3. What metrics are available to external stakeholders for use in assessing Vail's capital budgeting decisions?
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