Deer Valley Lodge Project Essay

743 WordsNov 29, 20113 Pages
Abstract The purpose of this unit 5 individual project is to take into consideration the revamping project associated with Deer Valley Lodge. The ski resort has made plans to add to the already sprawling location and wish to determine whether based on tax and cost information, if the new improvements are of an advantage or a disadvantage to the company as a whole. Deer Valley Lodge Deer Valley Lodge is a ski resort that has plans to add five new chairlifts to their site. The costs/interest to the company per chairlift is as follows: • Lift Costs $2 Million • Preparation of slope and installation costs $1.3 Million • 300 additional skiers if built • ONLY 40 days a year when the extra room for skiers will be needed. •…show more content…
Then you take into prospective the Profit which is the difference of the Incremental revenue and the Incremental costs which in turn is 560,000. If this is the case then it is understood that the before-tax cash flow is as follows: 1. Initial year: 3,300,000 2. Every year after: 560,000 These figures are important when determining the factors that will suggest that the building of the new lift is of the utmost importance. Computing the before-tax NPV of the new lift: Will it be profitable Due to the NPV being a positive number listed in the above calculations it is my belief and will be the advantage of the company in question to go ahead with the project and expect a great return for their efforts. Cash flow is one of the most important facets of an organization. Net present value also known as (NPV) can be calculated before or after taxes ( CCIM Institute, 2007). Computing the after-tax NPV: Rate of return Before tax NPV: 3,300,000 +560,000 (1/1.14 +1/ 1/1.142+(+1/1.1420) 3,300,000 + 560,000 (X) 6.62313055 3,300,000 + 3,708,953.11 = 408,953.11 Subjective

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