Snowbowl Resorts wants to create more snowmaking capacity on their ski mountain. This increase in capacity...

Snowbowl Resorts wants to create more snowmaking capacity on their ski mountain. This increase in capacity requires the purchase of additional snow-making equipment that will cost $697,000. Based on input from the Accounting Department, this would be depreciated on a straight-line basis to zero over the 5-year life of this new snowmaking project. When the project is over, the equipment can be sold for $192,000. There is a need for additional net working capital at the beginning of the project in the amount of $62,000. This will be recovered at the end of the project. The operating cash flow will be $187,600 a year. Assume the appropriate discount rate is 14 percent and that the appropriate tax rate is 35 percent. What is the net present value of this snowmaking project?

Expert Solution

Net Present Value = -$75852.02, refer below working. Please thumbs up :)

jeff jeffy answered 1 year ago

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