Consider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment. Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) 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. Payback The payback will be years. The residual value the computation of the payback and the payback method cash flows that 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 places. Select the formula to calculate the ARR. ARR Consider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment. Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) Read the requirements. The ARR will be %. because the depreciation expense is Additionally, the The ARR when the residual value changes to zero. The average annual operating income (numerator) will average investment (denominator) is when the asset does not have a residual value. Requirement 3. Assume Kyler Valley screens its potential capital investments using the following decision criteria: 4.6 years Maximum payback period Minimum accounting rate of return 18.25 % Will Kyler Valley consider this project further or reject it? than the 4.6-year maximum, and the ARR is than the 18.25% minimum. Since the investment both decision criteria, Kyler Valley to consider The payback period is this investment further. 's manage onsider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $ olld More Info . X Data Table ea hd 120 skiers 148 days he Under the assumption that the expansion would have a residual value of $500,000, the managers calculated the payback period to be 4.3 years, the ARR to be 21.61%, the average annual operating income to be $1,350,820, the average amount invested to be $6,250,000, and the average annual net cash inflow to be $2,788,320. Addition 8 years vel Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Kyler 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 $ 238 eg 81 Assume that Kyler 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. Ta 12,000,000 lin Discount rate 14% Print Done Print Done than the 4.6-year maximum, and the ARR is than the 18. he payback period is is investment further. Consider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment. Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) 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. Payback The payback will be years. The residual value the computation of the payback and the payback method cash flows that 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 places. Select the formula to calculate the ARR. ARR Consider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $12,000,000 Spring Park Lodge expansion would be a good investment. Assume Kyler Valley's managers developed the following estimates concerning the expansion: (Click the icon to view the estimates.) (Click the icon to view additional information.) Read the requirements. The ARR will be %. because the depreciation expense is Additionally, the The ARR when the residual value changes to zero. The average annual operating income (numerator) will average investment (denominator) is when the asset does not have a residual value. Requirement 3. Assume Kyler Valley screens its potential capital investments using the following decision criteria: 4.6 years Maximum payback period Minimum accounting rate of return 18.25 % Will Kyler Valley consider this project further or reject it? than the 4.6-year maximum, and the ARR is than the 18.25% minimum. Since the investment both decision criteria, Kyler Valley to consider The payback period is this investment further. 's manage onsider how Kyler Valley Spring Park Lodge could use capital budgeting to decide whether the $ olld More Info . X Data Table ea hd 120 skiers 148 days he Under the assumption that the expansion would have a residual value of $500,000, the managers calculated the payback period to be 4.3 years, the ARR to be 21.61%, the average annual operating income to be $1,350,820, the average amount invested to be $6,250,000, and the average annual net cash inflow to be $2,788,320. Addition 8 years vel Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Kyler 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 $ 238 eg 81 Assume that Kyler 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. Ta 12,000,000 lin Discount rate 14% Print Done Print Done than the 4.6-year maximum, and the ARR is than the 18. he payback period is is investment further