Consider how Root Valley Waterfall Park Lodge could use capital budgeting to decide whether the $12,500,000 Waterfall
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Question:
Consider how Root Valley Waterfall Park Lodge could use capital budgeting to decide whether the $12,500,000 Waterfall Park Lodge expansion would be a good investment. Assume Root Valley's managers developed the following estimates concerning the expansion:
What is the project's NPV (round to nearest dollar)? Is the investment attractive? Why or why not?
Calculate the net present value of the expansion.
Assume that Root Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $850,000 at the end of its ten-year life. They have already calculated the average annual net cash inflow per year to be $2,738,736.
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