Deer Valley, a ski resort in the Wasatch Range in Utah, has plans to add a new chairlift. Deer Valley limits ticket sales in order to provide skiers with shorter lift lines. Suppose that the new lift will cost $2,000,000, and preparing the slope and installing the lift will cost an additional $1,300,000. The lift will allow the resort to sell an additional 300 ski tickets per day without overcrowding. They will not sell more than the additional 300 tickets due to their policy to limit crowding. There are 40 days a year that the resort will need the extra capacity. (Assume that the resort will sell all 300 additional tickets on those 40 days). Running the new lift will cost $500 per day for the entire 200 days the resort is open. Lift tickets at Deer Valley Sell for $80 a day and the direct costs for each additional skier are $30 (this means there is a contribution margin of $50 per ticket sold). The new lift has a useful life of 20 years.

1. Assume that the before tax required rate of return (hurdle rate) for deer valley is 12%. using excel, compute the before tax NPV and the before tax IRR for the new lift. provide the managers of deer valley with your computations and advise them whether adding the lift will be a profitable investment based on their investment requirements.

2. Are there any non-quantitative factors that management should consider before making this investment decision?