Responsibility Centers and Financial Controls

Deliverable Length: 1 page and 1 Excel Spreadsheet

Consider the following scenario:

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years.

Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
What subjective factors would affect the investment decision?
You can view a present value tableThru this website please copy and paste in URL https://www.flexstudy.com/demo/demopdf/96019_appendix.pdf

p(2)

Place your order now to enjoy great discounts on this or a similar topic.

People choose us because we provide:

Essays written from scratch, 100% original,

Delivery within deadlines,

Competitive prices and excellent quality,

24/7 customer support,

Priority on their privacy,

Unlimited free revisions upon request, and

Plagiarism free work,

 

Unlike most other websites we deliver what we promise;

  • Our Support Staff are online 24/7
  • Our Writers are available 24/7
  • Most Urgent order is delivered with 6 Hrs
  • 100% Original Assignment Plagiarism report can be sent to you upon request.

GET 15 % DISCOUNT TODAY use the discount code PAPER15 at the order form.

Type of paper
Academic level
Subject area
Number of pages
Paper urgency
Cost per page:
Currency:
Total: