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Consider how Frost Valley, a popular ski resort, could use capital budgeting to decide whether the $9.5 million Stream Park Lodge expansion would be a good investment. (Click the icon to view the expansion estimates.) Assume that Frost Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $850,000 at the end of its nine-year life. Read the requirements. Requirement 1. Compute the average annual net cash inflow from the expansion. 0 Data Table - X First enter the formula, then compute the average annual net cash inflow from the expansion. (Round your answer to the nearest dollar.) Average net cash inflow per day 13,764 Number of ski days per year 160 Average annual net cash inflow 2,202,240 $ X $ $ Assume that Frost Valley's managers developed the following estimates concerning a planned expansion to its Stream Park Lodge (all numbers assumed): 124 Requirement 2. Compute the average annual operating income from the expansion. First enter the formula, then compute the average annual operating income from the expansion. (Round your answer to the nearest dollar.) 160 9 Average annual net cash inflow 9500000 Annual depreciation expense 850000 Average annual operating income from asset 961111 Number of additional skiers per day.... Average number of days per year that weather conditions allow skiing at Frost 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.. Discount rate. $ 245 $ 134 $ 9,500,000 14% - * Requirements 1. Compute the average annual net cash inflow from the expansion. 2. Compute the average annual operating income from the expansion. 3. Compute the payback period. 4. Compute the ARR. Print Done

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