Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managersdeveloped the following estimates concerning the expansion(Cack the icon to view the estimates)Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of es ten-year life The average annual operating incomefrom the expansion is $1 413,936 and the depreciation has been calculated as $1,200,000Calculate the ARR Round to two decimal placesAverage annual operating incomeAverage amount investedData tableARRNumber of additional skiers per dayAverage number of days per year that weather conditionsallow skiing at Smith ValleyUseful life of expansion (in years)Average cash spent by each skier per dayAverage variable cost of serving each skier per dayCost of expansionDiscount rate5118 skiers142 days10 years2357913,000,00010%X

Accounting rate of return is computed as = Annual net income / Initial investment

Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers developed the following estimates concerning the expansion (Click the icon to view the estimates ) Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of its ten-your ide The average annual operating inco from the expansion is $1413,936 and the depreciation has been calculated as $1,200,000 Calculate the ARR Round to two decimal places Average annual operating income Average amount invested ARR X

Consider how Smith Valley Brook Park Lodge could use capital budgeting to decide whether the $13,000,000 Brook Park Lodge expansion would be a good investment Assume Smith Valley's managers developed the following estimates concerning the expansion (Click the icon to view the estimates ) Assume that Smith Valley uses the straight line depreciation method and expects the lodge expansion to have a residual value of $1,000,000 at the end of its ten-your ide The average annual operating inco from the expansion is $1413,936 and the depreciation has been calculated as $1,200,000 Calculate the ARR Round to two decimal places Average annual operating income Average amount invested ARR X

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 14E

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