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.