American Intercontinental University Denise Hernandez Unit 5 Assignment 1

1. Investment = when you add $2,000,000 by $1,300,000 it will = $3,300,000 Annual cash inflow = if you take 300 skiers and multiply by 40 days and by $55.00/skier-day = $660,000 Annual cash outflow = (200 days multiplied by $500/day) it will = $100,000 PV of cash flows @ 14% = ($660,000 subtract from $100,000) multiply by 6.6231 it will = $3,708,953 NPV = $3,708,953 subtract by $3,300,000 it will = $408,953 When you have a new lift you will be creating a value of $408,953.00, this value will make an investment that is profitable. 2. After-tax cash flows = $560,000.00 multiply by .6 it will = $336,000.00 PV of after-tax cash flows @ 8% = $336,000 multiply by 9.8181 It will = $3,298,897 PV of tax savings = $3,300,000 multiply by .4 multiply by .7059 (From Exhibit 11-7) = $936,540.00 NPV after-tax = $3,298,897 add $936,540 subtract $3,300,000 it will = $935,43

You will have an investment that will lift more profits after-tax basis. 3. Subjective factors that might affect this decision include Money made on any sales of food, any equipment rented, as well any additional products purchased by the skiers. * You will have an outcome of more happy customers because you will have a less crowd on the days that you will not have any additional lifts and it will result in not having those additional skiers because you will not have that additional lift. * When there is bad weather you will not see as many