Refer to the Bear Valley Data Set in E12 32A
Refer to the Bear Valley Data Set in E12- 32A.

Requirements
1. What is the project’s NPV? Is the investment attractive? Why or why not?
2. Assume that the expansion has no residual value. What is the project’s NPV? Is the investment still attractive? Why or why not?
In E12- 32A
Assume that Bear Valley’s managers developed the following estimates concerning a planned expansion to its Autumn Park Lodge (all numbers assumed):
Number of additional skiers per day......................................................... 117
Average number of days per year that weather conditions allow
skiing at Bear Valley............................................................................... 162
Useful life of expansion (in years).............................................................. 10
Average cash spent by each skier per day................................................ $ 245
Average variable cost of serving each skier per day................................ $ 140
Cost of expansion..................................................................................... $ 8,500,000
Discount rate............................................................................................. 10%

Assume that Autumn Valley uses the straight- line depreciation method and expects the lodge expansion to have a residual value of $ 700,000 at the end of its ten- year life.

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