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Deliverable Length:  1 page and 1 Excel Spreadsheet

https://class.aiu-online.com/_layouts/MUSEViewer/MUSE.aspx?mid=535682

https://class.aiu-online.com/_layouts/MUSEViewer/MUSE.aspx?mid=535654

http://www.bizfilings.com/toolkit/sbg/finance/your-financial-position/contribution-margins-analysis.aspx

Consider the following scenario:

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years.

Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer.
What subjective factors would affect the investment decision?
You can view a present value table here.

Individual Project Rubric

Grading Criteria

Percentage

Deliverable requirements addressed; understanding of material and writer’s message and intent are clear.

40%

Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand.

10%

External research incorporated in the paper, if any, supports the writer’s position properly acknowledged and cited; direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluded title page, abstract or table of contents if used, tables, exhibits, appendices, and reference page(s).) Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences.

5%

Critical thinking: Position is well-justified; logical flow; examples provided where appropriate.

20%

Structure: Includes introduction and conclusion; proper paragraph format; reads as a polished academic paper or professional presentation, as appropriate for the required assignment deliverable.

10%

Mechanical: No spelling, grammatical, or punctuation errors.

10%

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