Deer Valley Lodge Research Paper Example | Topics and Well Written Essays - 250 words

cervid Valley Lodge - Research Paper ExampleIn do a decision of an enthronement, value of NPV is critical in deciding if an investment is good or not. A positive value means that an investment is good, but a negative value means that the investment is not worth it. In this case, the value is positive therefore, I would advise the management to go onward and invest in the project (Megginson et al. 252).The net income from the investment annually is $560,000. The tax rate on income is 40% leaving us with 60%. 40% of $560,000 is $224,000, meaning that the after-tax net income is $336,000. The rate of return due to tax revenue consideration is expected to drop down to 8%, therefore, the MACRS recovery period is 10 years in order to save on tax costs. The new NPV provide mean $336,000 is multiplied by the constituent 9.818. This will with NPV of $3,298,848. Here, there is a new twist as the investment is to be depreciated within 10 years. Some money will be saved on taxes by this mo ve. To find the tax nest egg, the sign investment ($3,300,000) is multiplied by the tax rate to get $1,320,000. The tax savings are accordingly multiplied by the 8% discount rate for ten years resulting in $931,788, tax savings NPV. $931,788 is then added to $3,298,848 to get $4,230,636. Compared to the $3,300,000, the initial investment we get a resulting figure of $930,636. This is a very super investment as it earns better results than the first scenario with the kind of returns it gives.The scenarios painted in the two parts in a higher place are just estimates on paper that are hoped will be the case. The figures are assumed that they will remain consistent, but in reality many things could alter that might affect the envisioned income streams from the investment. Deer Valley is a resort that depends on the choice of tourists to flock and use the facilities. Many factors can change the situation including weather conditions like heavy rainfall, delayed snowfall which will come at the supposititious peak season or any other natural calamity/disaster