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Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create...

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Accounting

Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create 24 additional rooms for rent. The following estimates are available:

Cost of expansion $ 3,540,000
Discount rate 10%
Useful life 20
Annual rental income $ 1,350,000
Annual operating expenses $ 900,000

Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,080,000.

Required:

  1. Calculate the annual net operating income from the expansion.
  2. Calculate the annual net cash inflow from the expansion.
  3. Calculate the ARR (Round your answer to 2 decimal places)
  4. Calculate the payback period (Round your answer to 1 decimal place.)
  5. Calculate the NPV. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.

image

\begin{tabular}{|l|l|l|} \hline 1. Annual Operating Income & & \\ \hline 2. Annual Net Cash Inflow & & \\ \hline 3. ARR & & % \\ \hline 4. Payback Period & & years \\ \hline 5. NPV & & \\ \hline \end{tabular}
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