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Computation of NVP

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https://www.studypool.com/discuss/363558/serious-tutors-only-absolutely-no-plagiarism-11
Answer 1.
The tax before Computation of NVP related to new lift as well as managers’ advice:
Total Investment
Total Investment =1 lift cost + (installation cost & slope preparation)
=$2,000,000 + $1,300,000
= $3, 3000, 000
Annual Cash Flow
Days worked = 40
Per day worked = $55
Skiers = 300
Total Cash flows = 40*55*300 = $660,000
Incremental Cost
Day = $200
Per day Rate= $500
Total Incremental Cost = 200 *$500 = $100,000

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Computation of Net cash Flow:
Cash inflow = $660,000
Less: Cost = $100,000
Net cash Flow = $560,000
Computation of Before Tax NPV
Total Present Value of cash flow @14 % = net cash flows * Present value @14%
= $560,000* 6.623
= 3,708,936
Total NPV
Total NPV = Net cash flow - cash outflows
= $3,708,936.00 - $3,300,000.00
= $408,936.00
The above computed profit of 408,936 shows that it is profitable for the managers of Deer Valley
to make investment in new lift.

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https://www.studypool.com/discuss/363558/serious-tutors-only-absolutely-no-plagiarism-11 Answer 1. The tax before Computation of NVP related to new lift as well as managers’ advice: Total Investment Total Investment =1 lift cost + (installation cost & slope preparation) =$2,000,000 + $1,300,000 = $3, 3000, 000 Annual Cash Flow Days worked = 40 Per day worked = $55 Skiers = 300 Total Cash flows = 40*55*300 = $660,000 Incremental Cost Day = $200 Per day Rate= $500 Total Incremental Cost = 200 *$500 = $100,000 Computation of Net cash Flow: Cash inflow = $660,000 Less: Cost = $100,000 Net cash Flow = $560,000 Computation of Before Tax NPV Total Present Value of cash flow @14 % = net cash flows * Present value @14% = $560,000* 6.623 = 3,708,936 Total NPV Total NPV = Net cash flow - cash outflows = $3,708,936.00 - $3,300,000.00 = $408,936.00 The above computed profit of 408,936 shows that it is profitable for the managers of Deer Valley to make investment in new lift. Answer.2 After tax cash flow After tax cash flow = Total Cash flow – 40% tax = $560,000- 224,000 = 336,000 Net Present value of after tax cash flow = Net Cash Flows after Tax* P ...
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