Question

Refer to the Smith Valley Snow Park Lodge expansion project in Short Exercise S26- 4 and your calculations in Short Exercises S26- 5 and S26- 6. Assume the expansion has zero residual value.

Requirements
1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place.
2. Will the project’s ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places.
3. Assume Smith Valley screens its potential capital investments using the ­following decision criteria:
Maximum payback period ........ 5.3 years
Minimum accounting rate of return .... 16.55%
Will Smith Valley consider this project further or reject it?



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  • CreatedJanuary 16, 2015
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