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. •New lifts will cost $500.00 per day for 200 days
•Tickets cost $55.00 per day
•New lift has an economic life of 20 years

The above figures are very important when taking into prospective the planning and implementation of the planning for future extensions. Based on this knowledge, this exercise will call for explanation of the following information in this paper: 1.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. 2.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. 3.What subjective factors would affect the investment decision? Computing Revenue and Cost

Based on the previously listed figures it is safe to assume that the below figures will show the appropriate yield given the costs associated with the building of the new lift. Figuring...

...1. I am asked to compute the before-tax Net Present Value or NPV of a new ski lift for DeerValleyLodge and advise the management there of the profitability. Before I am able to make this calculation there are a few calculations that I will need to make first. First the total amount of the investment, this will be the cost of a lift itself $2 million plus the cost of preparing the slope and installing the lift $1.3 million. Thus the investment amount for one lift is $3.3 million.
Next I will need to find out the yearly net income from the investment. This will be gross ticket sales minus the total expenses. DeerValley expects 300 skiers per day for 40 days at $55.00 per ticket, giving us $660,000 in ticket sales. In order to figure the total expenses I need to separate the fixed and variable expenses. Fixed expenses are those that will be there everyday the lodge is open regardless of the number of skiers. The Lodge is open 200 days per year and the cost of running the new lift is $500 per day for the entire 200 days giving us $100,000 in fixed costs. Variable costs are the expenses based on the number of customers. There is an additional $5 expense per skier per day associated with the new lift. If there are 300 skiers multiplied by $5 each multiplied by the 40 days that they are expected to be on the lift, we will have $60,000 in variable expenses. Fixed...

...DeerValleyLodge Ski Resort
Katrina Edwards
14 December 2008
AIU
DeerValleyLodge Ski Resort
DeerValleyLodge wants to upgrade their facilities by adding five ski lifts. What we were first asked to do was to calculate the investment, which includes the lifts, installation, and preparation. It’ll cost $2 million for each lift and $1.3 million to prepare the slopes. The investment, what needs to be spent today is $3.3 million, you’ll get that figure by adding the costs of the lift and preparing the slopes.
Next we need to figure out the annuity or income. The additional slopes will be open 40 days a year and plans at selling 300 tickets at $55 each. To find the income, we did the following: 300 * 40 * 55 = $660,000. The income or gross sales DeerValleyLodge will make would be $660,000.
Calculating the yearly expenses is easy, we just multiplied the cost per day ($500) times the number of days open (200) yearly. So the yearly expenses are $500 * 200 = $100,000. The net income was found by subtracting expenses from income. $660,000 - $100,000 = $560,000, which is the amount made from ticket sales.
Next we had to get the Net Present Value (NPV), which is the “sum of the present values of all expected cash flows (Horngren, Sundem, Stratton, Burgstahler, and Schatzberg, 2008),” of the...

...Project Management, 2e (Pinto)
Chapter 3 Project Selection and Portfolio Management
3.1 True/False
1) Numeric project selection models, by their very nature, employ objective values.
Answer: FALSE
Diff: 2
Section: 3.1 Project Selection
Skill: Definition
AACSB Tag: Reflective
2) Every decision model contains both objective and subjective factors.
Answer: TRUE
Diff: 3
Section: 3.1 Project Selection
Skill: Factual
AACSB Tag: Reflective
3) A simplified scoring model addresses all the weakness of a checklist model for project screening.
Answer: TRUE
Diff: 1
Section: 3.2 Approaches to Project Screening and Selection
Skill: Conceptual
AACSB Tag: Reflective
4) The Analytical Hierarchy Process elegantly addresses scaling issues in criteria and negative utility in alternative scores.
Answer: FALSE
Diff: 1
Section: 3.2 Approaches to Project Screening and Selection
Skill: Conceptual
AACSB Tag: Analytic Skills
5) The efficient frontier in a profile model is the set of options that offers a maximum return for a given level of risk or a minimum risk for every level of return.
Answer: TRUE
Diff: 2
Section: 3.2 Approaches to Project Screening and Selection
Skill: Factual
AACSB Tag: Analytic Skills
6) The present value of money is lower the further out in the future I expect to spend it.
Answer:...

...ANNEXTURE
Questionnaire
Dear respondent,
I m a student of “Bhagwan mahavir college of business administration, surat” conducting a survey for my project preparation, as the requirement of partial fulfilment of subject project in third year(semester-VI) BBA in surat city of a study on “A COMPARATIVE STUDY ON BRITANNIA AND PARLE COMPANY IN SURAT CITY (A SURVEY ON BISCUIT )” I assure that the information given by you are strictly used for academic purpose only. I request you to help me in gathering information by filling up yhe following information.
Thank you,
Abhishek sojitra
Bhagwan mahavir business administration
Top of Form
1) Do you eat biscuit?
Yes
No
2) Select your likely tastes for biscuit?
Sweet
Salty
Sweet & Salty
Cream biscuit
Others
3) What type of biscuit you normally prefer?
Branded
Bakery product
4) How often do you eat biscuit?
Once in a week
Once in a month
Once in a fortnight
Alternate days
Every day
5) When do you have biscuit?
At breakfast time
At evening
Any time
6) Which brand you normally buy?
Britannia
Parle
Both
Other:
7) From where do you buy biscuit?
Provisional store
Hawkers
Convenience store
Other:
8) Out of the following brand which...

...30 years.
32. Expected value of iron ore mined during year 1 = Rs.300 million
Expected present value of the iron ore that can be mined over the next 15 years assuming a price escalation of 6% per annum in the price per tonne of iron
1 – (1 + g)n / (1 + i)n
= Rs.300 million x ------------------------
i - g
= Rs.300 million x 1 – (1.06)15 / (1.16)15
0.16 – 0.06
= Rs.300 million x (0.74135 / 0.10)
= Rs.2224 million
Chapter 8
INVESTMENT CRITERIA
1.(a) NPV of the project at a discount rate of 14%.
100,000 200,000
= - 1,000,000 + ---------- + ------------
(1.14) (1.14)2
300,000 600,000 300,000
+ ----------- + ---------- + ----------
(1.14)3 (1.14)4 (1.14)5
= - 44837
(b) NPV of the project at time varying discount rates
= - 1,000,000
100,000
+
(1.12)
200,000
+
(1.12) (1.13)
300,000
+
(1.12) (1.13) (1.14)
600,000
+
(1.12) (1.13) (1.14) (1.15)
300,000
+
(1.12) (1.13) (1.14)(1.15)(1.16)
= - 1,000,000 + 89286 + 158028 + 207931 + 361620 + 155871
= - 27264
2. Investment A
a) Payback period = 5 years
b) NPV = 40000 x PVIFA (12%,10) –...

...The Central ValleyProject (CVP) is a Federal water project set up and run by the US Bureau of Reclamation to provide water for the Central Valley in California. Through twenty dams and reservoirs the CVP facilitates the collection and delivery of water for irrigation, municipal, and industrial use, as well as producing hydropower, providing flood control and recreational facilities on their reservoirs. The CVP provide a good example of how cost allocation works within a vast organization. I will use this organization to describe the method used by the CVP to allocate cost and whether I agree or disagree with their methods. I will also be identifying situations where common costs are allocated. I will explain the impact of allocating common costs on internal decision making and the consequences of not allocating common costs for internal decision making. Finally I will explain how decision making in this organization is affected by the way costs are allocated.
The CVP is an organization comprised of many different facilities and functions, as described in the above paragraph, so they must have a method for allocating costs and calculating repayment responsibilities for each feature within the CVP. They must accomplish this in a way that is in compliance with authorizing legislation, regulatory requirements, interagency agreements and policy guidelines. To accomplish this task they use a three step cost...

...
instruments.
Q.6 Differentiate between Location and Site. Describe various Input, Output and other locational factors
those must be considered for assessing project feasibility.
Q.7 What are the components of Investment Cost? Give a brief account of each.
Q.8 Explain briefly the use of Profitability Index (P.I), Net Present Value (NPV), Internal Rate of Return
(IRR) and Pay back period as an analytical techniques used in project appraisal.
Q.9 A firm is considering replacing a computer system with a new one. Purchase price of new computer
is Rs. 80,000.00 and its installation costs are Rs. 1,000.00. the cash flow from the sale of the old
computer is expected to be Rs. 20,000.00. the CFAT, after the installation of the new computer is
expected to be Rs. 15,000.00 each year for five years. The Salvage value at the end of 5 years has
been calculated as Rs. 20,000.00. Should the proposal of replacing the computer be accepted on the
basis of NPV as a decision criteria discounted @ 12%. What is Profitability Index (P.I) is used as
decision criteria?
Q.10 Discuss the role of IRR, NPVR and pay back period as alternative Investment criteria. A perfect
requires an investment of $ 2.0 million at the end of tenth year. The capital cost (discount rate) of the
project financing is estimated to be 10 %
a) What is the pay back period?
b) Using NPV as appraisal criterion, would your...

...manager’s bonuses with the profits that company makes. This can result in managers discarding potentially positively large NPV projects for fear of the large investment they will have to make which then will affect their bonuses. Using EVA as a performance measure should “mitigate this problem as it involves the capitalization of expenditures managers might try to cut if they were pressured for profits” (Merchant & van der Stede, Management Control Systems, 2011)
Carrying on from accounting measures the focus will now be on one specific ratio measure; Return on Investment. It provides a way of measuring returns in percentage terms which virtually all managers understand (Way, 2012). Unfortunately, this measure is also prone to investment myopia and can create incentives for managers to lease assets as opposed to buying them. Below is the formula for ROI to aide in the explanation:
6
A new investment could reduce the ROI of the project as the value of the average operating assets increases. A manager who is evaluated based on ROI will reject any project whose rate of return is below the division’s current ROI, even if the investment would be a good one for the company as a whole (Friedlb & Plewa, 1996). EVA, as well as Residual Income, would solve this matter as consideration is given to whether or not the net operating income resulting from the project is above the minimum required rate of return. If this is...

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