Explore BrainMass

Explore BrainMass

    Managerial Accounting and Organizational Controls at Deer Valley Lodge

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Unit 4IP 1 Page
    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 park 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.
    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?
    Unit 4 DB 3-4 paragraphs
    You have been asked to speak about the topic of responsibility centers to a group of executives at a conference.
    For this speech you should select a company/business that you are familiar with and briefly describe it. Give three examples of responsibility centers in that business. Describe how these responsibility centers interact.

    © BrainMass Inc. brainmass.com October 1, 2020, 10:39 pm ad1c9bdddf
    https://brainmass.com/business/organizational-theory/managerial-accounting-and-organizational-controls-at-deer-valley-lodge-234611

    Solution Summary

    This solution discusses the establishment of a responsibility center in 275 words, project profitability in 330 words and provides NPV calculations for Deer Valley Lodge in two attached Word and an attached Excel file.

    $2.19

    ADVERTISEMENT