i x Data Table 119 skiers ad 147 days Il ti 8 years od Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Smith Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day Cost of expansion $ 247 80 12,000,000 Discount rate 12% E cau la Print Done st -X i More Info Under the assumption that the expansion would have a residual value of $950,000, the managers calculated the payback period to be 4.1 years, the ARR to be 23.79%, the average annual operating income to be $1,540,081, the average amount invested to be $6,475,000, and the average annual net cash inflow to be $2,921,331. Assume that Smith Valley uses the straight-line depreciation method and now expects the lodge expansion to have zero residual value at the end of its eight-year life. Print Done Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal plac Select the formula to calculate the payback period. : = Payback The payback will be years. the computation of the payback and the payback method cash flows that The residual value occur after the payback period. Requirement 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal place Select the formula to calculate the ARR. . ARR The ARR will be %. The ARR when the residual value changes to zero. The average annual operating income (numerator) will because the depreciation expense is 1. Ad onally, the average investment (denominator) is when the asset does not have a residual value. Requirement 3. Assume Smith Valley screens its potential capital investments using the following decision criteria: Maximum payback period 5.3 years Minimum accounting rate of return 17.85 % Will Smith Valley consider this project further or reject it? The payback period is than the 5.3-year maximum, and the ARR is than the 17.85% minimum. Since the investment both decision criteria, Smith Valley to consider this investment further