Capital Budgeting (before tax and after tax NPV)
Not what you're looking for?
I have a friend who owns a ski lodge and wants to add 5 new chairlifts at the cost of 2 million per lift. One new lift will allow 300 additional skiers, and there are only 40 days days of ticket sales, and each customer 55 dollars a day. Running the new lift will cost him 500 dollars a day for the 200 days his lodge is open.
I would like to know what the before tax required rate of return 14 percent is on the net present value on the new lift and whether it will be profitable for him to invest, and if the after tax rate of return is at 8 percent, and the income tax rate is 40 percent and the modified accelerated cost recovery system is 10 years and compute the after tax of the net present value of the new lift so I can advise him whether or not it's going to be profitable?
The cost of installing the lift cost 1.3 million; they also have an economic lift of 20 years.
Purchase this Solution
Solution Summary
The before-tax and after -tax NPV of adding a new lift are calculated to determine whether adding the lift will be a profitable investment.
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.