Refer to the Wolf Valley Data Set in E12-35A.

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?

Data From Wolf Valley expansion Data Set:-

Assume that Wolf Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of \($1,000,000\) at the end of its eight-year life.

Data From E12-35A:-

Consider how Wolf Valley, a popular ski resort, could use capital budgeting to decide whether the \($8\) million Brook Park Lodge expansion would be a good investment.

Data From Wolf Valley expansion Data Set:-

Assume that Wolf Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of \($1,000,000\) at the end of its eight-year life.

Transcribed Image Text:

Number of additional skiers per day. 125 Average number of days per year that weather conditions allow skiing at Wolf Valley. 160 Useful life of expansion (in years)... 8 Average cash spent by each skier per day $ 240 Average variable cost of serving each skier per day. $ 142 Cost of expansion $8,000,000 Discount rate 12%