The Summit at Crystal Mountain is a small ski resort located just outside Mount

Rainier, Washington; approximately $100$ miles from Seattle. The resort consists of slopes that appeal to skiers of several different skill levels, though none of the slopes are difficult enough to appeal to the most highly skilled skiers. For a modest $$25$ lift fee, resort guests are allowed unlimited access to any of the resort$$s slopes for the day.

In recent years, other regional ski slopes in northern Washington and in Oregon

have steadily eroded attendance at The Summit at Crystal Mountain. Resort attendance has dropped from $250,000$ in $2016$ to $190,000$ for the recently completed $2022$ season. Current projections are that the trend will continue, dropping attendance to $180,000$ in $2023,$ and $175,000$ in $2024,$ before leveling off at $170,000$ for $2025$ and beyond. Lift ticket prices are expected to increase at the rate of inflation, $5\%.$

Following completion of the $2022$ season, The Summit at Crystal Mountain hired a

market research company to conduct a survey aimed at uncovering the primary reasons for the decline in resort attendance. The survey revealed that many teens preferred other resorts because of new modern chair lifts that had been added to each resort. The market research firm strongly urged The Summit at Crystal Mountain to consider purchasing a newset of state$-$of$-$the$-$art chair lifts of its own. In addition to the $$20,000$ The Summit at Crystal Mountain has spent on the survey, a new set of chair lifts would initially cost the resort $$1,500,000.$ The new lifts would be ready for the opening of the $2023$ season. The resort$$s current lifts were purchased at the end of the $2018$ season for $$400,000.$ They are being depreciated on a straight$-$line basis over an $8-$year life. However, The Summit at Crystal Mountain anticipates that their useful life could be stretched to $10$ years $($if not replaced$)$ at which time they could be sold for $$50,000.$ Each year the resort spends $$20,000$ on maintenance of the old chair lifts.

If the new lifts are purchased, The Summit at Crystal Mountain would sell its current

lifts immediately. However, the expected sales price would still be just $$50,000.$ If

purchased, the new lifts are expected to be depreciated on a straight$-$line basis over a six$-$year useful life. The Summit at Crystal Mountain believes that the new lifts could be soldfor $$100,000$ at the end of their $6-$year useful life. Annual maintenance expenses areexpected to be $$15,000.$

The Summit at Crystal Mountain believes that if the new lifts are purchased, resort

attendance will remain constant at $2022$ levels for the foreseeable future. In addition, theybelieve that the new lifts will allow them to increase the resort$$s lift ticket price to$$30$ for the $2023$ season. After $2023,$ they anticipate increasing ticket prices at the expected rate of inflation, $5\%.$

The Summit at Crystal Mountain maintains a minimum cash balance of $$25,000.$ Due to the nature of the business, other working capital accounts $($e$.$g$.,$ inventory, accountsreceivable and accounts payable$)$ are negligible. Regardless of resort attendance, the resort maintains a staff of $150$ employees at an average cost of $$10,000$ per employee per season. The nominal after$-$tax discount rate on the project is $12\%$ and the resort$$s marginal tax rate is $34\%.$

Conduct an analysis to assist The Summit at Crystal Mountain in deciding whether to purchase the new lifts. Assume that all cash flows are at year$-$end. That is$,$ if The Summit at Crystal Mountain purchases the new lifts, the purchase will take place at the end of $2022.$