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. Note: Round your answer to 2 decimal places. 4. Calculate the payback period. Note: Round your answer to 1 decimal place. 5. Calculate the NPV. (Future Value of $1,Present Value of $1, Future Value Annulty of $1. Present Value Annulty 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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Subject :- Accounting 

Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create 24 additional room
for rent. The following estimates are available:
Cost of expansion
Discount rate
Useful life
Annual rental income
Annual operating expenses
Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,640,000.
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.
$ 3,220,000
Note: Round your answer to 2 decimal places.
4. Calculate the payback period.
1. Annual Operating Income
2. Annual Net Cash Inflow
3. ARR
4. Payback Period
5. NPV
%6
9%
$ 2,050,000
$ 1,600,000
Note: Round your answer to 1 decimal place.
5. Calculate the NPV. (Future Value of $1,Present Value of $1, Future Value Annulty 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.
20
years
Transcribed Image Text:Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create 24 additional room for rent. The following estimates are available: Cost of expansion Discount rate Useful life Annual rental income Annual operating expenses Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,640,000. 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. $ 3,220,000 Note: Round your answer to 2 decimal places. 4. Calculate the payback period. 1. Annual Operating Income 2. Annual Net Cash Inflow 3. ARR 4. Payback Period 5. NPV %6 9% $ 2,050,000 $ 1,600,000 Note: Round your answer to 1 decimal place. 5. Calculate the NPV. (Future Value of $1,Present Value of $1, Future Value Annulty 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. 20 years
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