Paper Topic:

Deer Valley Lodge Ski Resort

"Income "Expenses "Skiers "Days "Ticket Price "Income "Skiers "Days "Expense "Expenses "300 "40 "50 "600000 "Running Lift "200 "500 "100000 "Skier cost "300 "40 "5 "60000 "Pre Tax Income "440000 "Total Expenses "160000 "Taxes "176000 "After Tax Income "264000 "Construction costs "3300000 "Desired NPV - Pre Tax "462000 "Desired NPV- After Tax "264000 "MACRS Recovery period "12 .5 years " Assuming all operation expenses for the Deer Valley Lodge Ski Resort stay the same and the number of skiers remains the same each year the addition of five new chair lifts can be a profitable venture . The desired PVR for both pre

and after tax can be realized . However , the proposed lift ticket price makes the MACRS recovery period 12 .5 years . To achieve a ten year MACRS recovery , the price of the lift tickets could be raised to 59 .50 . Raising the lift price may decrease the number of skiers using the new lifts the skiing industry is highly competitive and may not support higher lift ticket prices . Another option to achieve a 10 year MACRS without raising lift ticket prices is to increase the number of skiers using the new lifts . The present estimate is that new lifts would only need to be used 40 of the possible 200 skiing days in the season but increasing the number of skiers is an achievable option . This means only increasing the number of skiing days by approximately 18 or 7 more days . This may be a more viable option to attaining a 10 year MACRS recovery as increasing the number of skiers could be achieved using minimal advertising funds " Negative factors that could affect the profitability of the project would be a reduction in snow or other natural disasters , malfunctioning of the lifts , or not achieving the minimal numbers of skiers used to determine the feasibility of this project . All these factors , except other natural disasters , can be corrected in various ways and would affect the short term profitability of the project . But if the negative variables are watched closely and corrected quickly they should not affect the long term return on investment " Additional chair lifts at Deer Valley Lodge Resort could prove to be a wise choice for investors . As proposed the investors would not get a complete return on investment for twelve and a half years . But by closely watching the numbers of skiers using the lifts and advertising to increase those numbers , and barring any unforeseen calamities , the investors could realize a return on their investment in as little as ten years . An added benefit to this proposal is that the expected life of the lifts is twenty years which leaves open the possibility of putting aside capital the final ten years for the anticipated replacement of the chair lifts...

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