Points: 0.78 of 7 Save Consider how Burlington Ski Lodge could use capital budgeting to decide...

Transcribed Image Text:

Points: 0.78 of 7 Save Consider how Burlington Ski Lodge could use capital budgeting to decide whether a $10,000,000 lodge expansion would be a good investment. Assume Burlington Ski Lodge's managers developed the following estimates concerning the expansion: View the additional information. View the estimates. Read the requirements. Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place Select the formula to calculate the payback period. Amount invested Expected annual net cash inflow Payback The payback will be years. The residual value amputation of the payback and the payback method cash flows that occur after the payback period continue to now View the esti Read the reg Requirement Estimates Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Burlington Ski Lodge Select the for Useful life of expansion (in years) Am Average cash spent by each skier per day Average variable cost of serving each skier per day The payback Cost of expansion The residual Discount rate Print Done - 119 skiers decimal place. 146 days 8 years 244 75 10,000,000 8% sh flows that occur d the rea - uirement ct the for Am payback esidual Additional Information Under the assumption that the expansion would have a residual value of $850,000, the managers calculated the payback period to be 3.4 years, the ARR to be 33.04%, the average annual operating income to be $1,792,456, the average amount invested to be $5,425,000, and the average annual net cash inflow to be $2,936,206. Assume that Burlington Ski Lodge 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. decimal place. sh flows that oc Capital Budgeting to decide whether a $10,000,000 lodge expansion would be a ers developed the following estimates concerning the expansion e estin he requ Requirements - ement he for Am back dual 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. 3. Assume Burlington Ski Lodge screens its potential capital investments using the following decision criteria: Maximum payback period Minimum accounting rate of return 4.9 years 18.25% Will Burlington Ski Lodgeconsider this project further or reject it? Print Done decimal p sh flows Points: 0.78 of 7 Save Consider how Burlington Ski Lodge could use capital budgeting to decide whether a $10,000,000 lodge expansion would be a good investment. Assume Burlington Ski Lodge's managers developed the following estimates concerning the expansion: View the additional information. View the estimates. Read the requirements. Requirement 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place Select the formula to calculate the payback period. Amount invested Expected annual net cash inflow Payback The payback will be years. The residual value amputation of the payback and the payback method cash flows that occur after the payback period continue to now View the esti Read the reg Requirement Estimates Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Burlington Ski Lodge Select the for Useful life of expansion (in years) Am Average cash spent by each skier per day Average variable cost of serving each skier per day The payback Cost of expansion The residual Discount rate Print Done - 119 skiers decimal place. 146 days 8 years 244 75 10,000,000 8% sh flows that occur d the rea - uirement ct the for Am payback esidual Additional Information Under the assumption that the expansion would have a residual value of $850,000, the managers calculated the payback period to be 3.4 years, the ARR to be 33.04%, the average annual operating income to be $1,792,456, the average amount invested to be $5,425,000, and the average annual net cash inflow to be $2,936,206. Assume that Burlington Ski Lodge 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. decimal place. sh flows that oc Capital Budgeting to decide whether a $10,000,000 lodge expansion would be a ers developed the following estimates concerning the expansion e estin he requ Requirements - ement he for Am back dual 1. Will the payback change? Explain your answer. Recalculate the payback if it changes. Round to one decimal place. 2. Will the project's ARR change? Explain your answer. Recalculate ARR if it changes. Round to two decimal places. 3. Assume Burlington Ski Lodge screens its potential capital investments using the following decision criteria: Maximum payback period Minimum accounting rate of return 4.9 years 18.25% Will Burlington Ski Lodgeconsider this project further or reject it? Print Done decimal p sh flows