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##### Deer Valley Lodge has a plan to add 5 new lifts. One lift costs \$2million

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Deer Valley Lodge has a plan to add 5 new lifts. One lift costs \$2million;preparing the slope & installing another lift costs \$1.3 million.;Lift allows 300 add'tl skiers on slope, however,there are only 40 days a year when the extra capacity will be needed. Assuming Deer park will sell all 300 lift tickets on those 40 days.;Running the new lift will cost\$500 a day for entire 200 days the lodge is open.;Lift tix = \$55 a day. & the added cash expenses for each skier are\$5. The new lift has an economic life of 20 years.;1. assume that the before tax required rate of return for Deer Valley is 14%.;Compute the before tax NPV & advise managers if it will be profitable. Show calculations.;2 Assume the after tax rate of return for Deer Valley is 8%, & income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of new lift & advise managers if it will be profitable. why or why not? & show calculations.

Paper#26787 | Written in 18-Jul-2015

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