Refer to the Star Valley Data Set in E12 50B
Refer to the Star Valley Data Set in E12- 50B.

Requirements
1. What is the project’s NPV? Is the investment attractive? Why or why not?
2. Assume the expansion has no residual value. What is the project’s NPV? Is the ­investment still attractive? Why or why not?

Star Valley Data Set
Number of additional skiers per day......................................................................................................................... 120
Average number of days per year that weather conditions allow skiing at Star Valley......... 163
Useful life of expansion (in years).............................................................................. 10
Average cash spent by each skier per day.......................................................... $ 243
Average variable cost of serving each skier per day............................................ $ 142
Cost of expansion.............................................................................................. $ 9,000,000
Discount rate............................................................................................................... 14%
Assume that Star Valley uses the straight- line depreciation method and expects the lodge expansion to have a residual value of $ 900,000 at the end of its 10- year life.


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