Deer Valley Lodge Financial Analysis

Deer Valley Lodge Financial Analysis

Length: 1001 words (2.9 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
1. I am asked to compute the before-tax Net Present Value or NPV of a new ski lift for Deer Valley Lodge 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. Deer Valley 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 costs of $100,000 plus the variable costs of $60,000 will give us $160,000 in total expenses. The gross ticket sales of $660,000 minus the total expenses of $160,000 give us a yearly net income of $500,000.

The new lift has an economic life of 20 years and we would like to make 14% on our investment. The NPV factor of 14% at 20 years is 6.6231. By multiplying our net yearly income or our annuity of $500,000 times the NPV factor of 6.6231 we will have a NPV of $3,311,550.

When comparing the NPV to the amount of the investment I find that there will be a before tax profit of $11,550, meaning that this could be a good investment.

2. I am now asked to compute the after-tax NPV of a new lift and again advise the management of the profitability.

How to Cite this Page

MLA Citation:
"Deer Valley Lodge Financial Analysis." 123HelpMe.com. 21 Feb 2020
    <https://www.123helpme.com/view.asp?id=164534>.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

The Need For Deer Hunting Essay

- The Need for Deer Hunting Years ago, killing animals for food was part of the average man’s everyday life. While, now a days, hunting is questioned by many across the world because it is commonly viewed as a recreational activity. Many residents have a problem with the dangers that come with hunting. Not to mention, as time goes on, society seems to feel differently about animals and how they should be treated. One of the biggest debates is the harvest of white tailed deer. All over the United States, white tailed deer thrive because of the few predators that feast upon them and the large forests and habitats that these deer can flourish in....   [tags: Hunting, White-tailed deer, Deer, United States]

Research Papers
2063 words (5.9 pages)

Hiring Employees At My Deer Ranch Essay

- Yes, I plan on hiring employees at my deer ranch. I plan to recruit my employees as younger, energetic, respectable, and responsible hunters. Having all of these qualities is necessary to be a part of my business. This is because I will have hunters with guns and do not want anyone to be hurt. This job will have many risks that need to be taken with caution. I know young and caution do not mix, but I can see many older people would not want the job to be outside all day doing hard labor. For their hourly, I will pay them $10....   [tags: Hunting, Deer, White-tailed deer, Mule deer]

Research Papers
1207 words (3.4 pages)

If You Hunt Whitetail Deer Essay

- If you hunt whitetail deer with a bow you know just how difficult it can be to just lay eyes on a mature buck let alone harvest one. There is nothing better than time afield for honing the skills to consistently harvest mature deer but articles like this one can help you understand what your are experiencing in the woods. Mature whitetails, bucks as well as does, may act a little differently than younger deer and if you want to target mature whitetails you must approach your scouting as well as hunting a little differently as well....   [tags: White-tailed deer, Hunting, Deer, Mule deer]

Research Papers
948 words (2.7 pages)

Hunting At The Deer Lease Essay

- Growing up in a small town in South Central Texas, you get use to hearing the phrases, “Oh, I can’t I’m taking my kids out hunting this weekend.” and “My boy shot his first buck, last weekend out at the deer lease.” and my personal favorite courtesy of my own father, “I can’t go to your dance recital/ peewee rodeo/ jr high volleyball game, I’ll be out of town at the deer lease.” Growing up in a state that is predominately known for having decent whitetail deer and a moderate season, from a young age you learn that a lot of school functions and family functions will be dependant on how deer season falls in your area....   [tags: Hunting, White-tailed deer, Deer, Mule deer]

Research Papers
852 words (2.4 pages)

Silicon Valley Job Hopping Contributes to Innovation Essay

- Silicon Valley has already attracted the attention of the world as a high-tech economic center since 1960, which lured other areas in the world to try to duplicate the distinctive industrial pattern of Silicon Valley. The first meaningful replication of Silicon Valley occurred in the mid of 1960. A batch of high-tech firms based on financial groups attempted to create a second Silicon Valley in New Jersey. Thus, they employed Stanford's dean of engineering and provost, Frederick Terman, who just retired....   [tags: Silicon Valley's Work Culture]

Research Papers
1912 words (5.5 pages)

Descriptive Essay : Rifle Deer Season

- “Thud thud thud,” it was all I heard when I was peering through my scope. The pleasure hunting gives me always had been immeasurable, any type of hunting, but my personal favorite is rifle deer season. The very first time I went deer hunting I was 14 years old. Opening weekend, my dad, who is a die hard hunter, was going to take me out with him. We were planning to head up North and hunt on public land in Emily, Minnesota. To make it to Emily and get set up before the sun rose, at exactly 8:06 in the morning, the truck engine was starting at five in the morning and pulling out five minutes later....   [tags: Deer, Hunting, Deer hunting]

Research Papers
866 words (2.5 pages)

The Deer Camp Essay

- Imagine the biggest deer of our life walking in front of us. The thing is so big that at first glance you didn’t even think it was a deer. That is what the Zellmer deer camp is all about. The deer camp was started seven and a half decades ago by my grandfather’s grandfather. The Zellmer deer camp consists of nine Zellmer’s and one family friend. It consists of myself and my three brothers, my dad, my uncle, and my three cousins along with my cousin’s friend. We have carried this tradition on since 1940 when my grandfather’s grandfather started it....   [tags: Hunting, Deer, Olfaction, Odor]

Research Papers
1074 words (3.1 pages)

Silicon Valley Medical Financial Analysis Essay

- 1) The WACC is basically computed by the sum of multiplying the costs per component to its respective proportional weight (how much that company uses a certain cost of capital) [See Appendix 1]. As financial management is focused on the maximization of the stock price, an optimal structure of costs based on these three factors is needed. In SIVMED’s case, based on the definition of WACC, all capital bases should be included in its WACC. These include its common stock, preferred stock, bonds and long-term borrowings....   [tags: Financial Analysis Finance Accounting]

Free Essays
1403 words (4 pages)

Essay on Vic Wilcox in David Lodge's Novel "Nice Work"

- Vic Wilcox in David Lodge's Novel "Nice Work" In the opening chapter of "Nice Work" we are introduced to Vic Wilcox, Managing Director of "J. Pringle & Sons Casting and General Engineering". He lives in an upmarket house on the outskirts of Rummage with his wife Marjorie and his three children. Raymond, Sandra and Gary. Vic is man who is quintessentially British. So much so that he refuses to buy goods made out of the country, the reason for his annoyance at Marjorie wanting a microwave (96% manufactured in the East) and for buying a Japanese clock radio....   [tags: Nice Work David Lodge Essays]

Research Papers
1730 words (4.9 pages)

The Valley Essays

- The Valley - Awake. In 1946, John Collier, Jr. and Aníbal Buitrón wrote The Awakening Valley, telling the story of a social miracle happening in Ecuador - in the valley at the foot of Tiata Imbabura. (1, cover) In 1993, forty-three years later, I set foot in that same area and discovered a valley, not awakening, but awake. My son, Matt, and I were traveling by bus, north out of Quito, on our way to Colombia. (4) We had been advised to be in Otavalo on a weekend to experience the famous market....   [tags: Andes Ecuador The Awakening Valley Papers]

Free Essays
2620 words (7.5 pages)

Related Searches

Our income tax rate is 40% leaving us with 60% of our net yearly income. Our net yearly income is $500,000 by multiplying that times 60%, our percentage that we will have left after taxes, we end up with $300,000.

Our rate of return will drop to 8% since we will be expecting a lower rate of return after taxes. The NPV factor for 20 years @ 8% is 9.8181. By multiplying the NPV factor of 9.8181 times our after tax annuity of $300,000 we have a NPV of $2,945,430.00 for our after tax net income.

Next I need to find the NPV of the tax savings from the depreciation of the investment. The amount of money that we save on taxes will be the amount of the deduction times the tax rate. I will be able to deduct the total investment over 10 years as depreciation. To find the tax savings on the investment I multiply the investment amount of $3.3 million times the tax rate of 40% to find the tax savings of $1,320,000.00. I then multiply the tax savings times the NPV factor of .7059, the discount rate of 8% at 10 years, to find $931,788.00, the NPV of the tax savings.

Now to find the total NPV of the after-tax income I add the NPV of the tax savings $931,788 to the NPV of the after-tax net income $2,945,430 giving us $3,877,218.00. When compared to the $3.3 million investment it looks like we have a profit of $577,218.00 making this a good investment.

3. The figures in the first two answers are purely estimates and are not in anyway set in stone. These estimates were made with a few assumptions such as longevity, maintenance, utility expenses, ticket prices, and the amount that they will be used. There are several factors that may change these numbers and should be considered prior to making an investment such as this. This is a ski resort and their income is based on the weather conditions and tourism. Both of these major factors can have dramatic fluctuations from year to year. For instance a late snow fall one year could push the ski season out past the major holiday vacation break drastically reducing the number of tourists available to ski. Unforeseen storms such as fires, earthquakes, and ice storms that are common to the mountains could cause severe damage during the peak of a season costing not only unplanned expenses, but the loss of ticket sales. Political and environmental issues could change the utility costs. Inflations could cause the employee wages to rise, adding to costs. Just trying to plan 20 years into the future can be challenging when dealing with the tourism industry, there are so many changes in styles, fads, technologies, and even economies. Who will you cater your business to 10 and 15 years from now? What about future competition from other resorts? On the other hand their will be great snow seasons too, providing many more days and attracting more visitors. Will these good years balance out with the bad? There are a lot of challenging questions when it comes to investment decisions. I believe knowledge is truly power in these instances and care must be taken whenever reviewing estimated figures.

Resources:

Horngren, Charles T., Sundem, Gary L., & Stratton, William O. (2005). Introduction to management accounting, 13th Edition. Upper Saddle River, NJ: Pearson Education, Inc..
Return to 123HelpMe.com