The owner of a ski resort is considering installing a new ski lift that will cost $850,000. Expenses for operating and maintaining the lift are estimated to be $2,000 per day when operating. The U.S.Weather Service estimates that there is a 55% probability of 90 days of skiing weather per year, a 30% probability of 100 days per year, and a 15% probability of 120 days per year. The operators of the resort estimate that during the first 90 days of adequate snow in a season, an average of 550 people will use the lift each day, at a fee of $10 each. If 10 additional days are available, the lift will be used by only 450 people per day during the extra period; and if 20 more days of skiing are available, only 250 people per day will use the lift during those days. The study period is eight years; the ski lift will be depreciated by using the MACRS Alternative Depreciation System (ADS); the ADS recovery period is seven years; MARR = 10% per year (after-tax); and the effective income tax rate (t) is 50%. Based on this information, what is the E(PW) and SD(PW) of the ATCF? Interpret the analysis results and make a recommendation on installing the ski lift. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Calculate wervy value ivi eduli ditenauve. (Round to the nearest munureus. Calculate the E(PW) and SD(PW) of the ATCF. E(PW) = 306,400 (Round to the nearest hundreds.) SD(PW) = 38,500 (Round to the nearest hundreds.) Based on the E(PW) and SD(PW), the lift should be installed. Alternative PW (10%), S 90-Day Season 100-Day Season 120-Day Season 272,400 339,100 365,800
The owner of a ski resort is considering installing a new ski lift that will cost $850,000. Expenses for operating and maintaining the lift are estimated to be $2,000 per day when operating. The U.S.Weather Service estimates that there is a 55% probability of 90 days of skiing weather per year, a 30% probability of 100 days per year, and a 15% probability of 120 days per year. The operators of the resort estimate that during the first 90 days of adequate snow in a season, an average of 550 people will use the lift each day, at a fee of $10 each. If 10 additional days are available, the lift will be used by only 450 people per day during the extra period; and if 20 more days of skiing are available, only 250 people per day will use the lift during those days. The study period is eight years; the ski lift will be depreciated by using the MACRS Alternative Depreciation System (ADS); the ADS recovery period is seven years; MARR = 10% per year (after-tax); and the effective income tax rate (t) is 50%. Based on this information, what is the E(PW) and SD(PW) of the ATCF? Interpret the analysis results and make a recommendation on installing the ski lift. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Calculate wervy value ivi eduli ditenauve. (Round to the nearest munureus. Calculate the E(PW) and SD(PW) of the ATCF. E(PW) = 306,400 (Round to the nearest hundreds.) SD(PW) = 38,500 (Round to the nearest hundreds.) Based on the E(PW) and SD(PW), the lift should be installed. Alternative PW (10%), S 90-Day Season 100-Day Season 120-Day Season 272,400 339,100 365,800
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The owner of a ski resort is considering installing a new ski lift that will cost $850,000. Expenses for operating and maintaining the lift are estimated to be $2,000 per day when
operating. The U.S.Weather Service estimates that there is a 55% probability of 90 days of skiing weather per year, a 30% probability of 100 days per year, and a 15% probability of
120 days per year. The operators of the resort estimate that during the first 90 days of adequate snow in a season, an average of 550 people will use the lift each day, at a fee of $10
each. If 10 additional days are available, the lift will be used by only 450 people per day during the extra period; and if 20 more days of skiing are available, only 250 people per day
will use the lift during those days. The study period is eight years; the ski lift will be depreciated by using the MACRS Alternative Depreciation System (ADS); the ADS recovery period
is seven years; MARR = 10% per year (after-tax); and the effective income tax rate (t) is 50%. Based on this information, what is the E(PW) and SD(PW) of the ATCF? Interpret the
analysis results and make a recommendation on installing the ski lift.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year.
Calculate wervy value ivi eduli ditenauve. (Round to the nearest munureus.
Calculate the E(PW) and SD(PW) of the ATCF.
E(PW) = 306,400 (Round to the nearest hundreds.)
SD(PW) = 38,500 (Round to the nearest hundreds.)
Based on the E(PW) and SD(PW), the lift should
be installed.
Alternative
PW (10%), S
90-Day Season
100-Day Season
120-Day Season
272,400
339,100
365,800
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