a ski company plan to add five new chai500 a day for the lift. the lifts cost 2 million and to install the lift cost another 1.3 mil.The lift will allow 300 additional skiers on the slopes but only 40 days a year will be needed. The company will sell 300 lift tickets on those 40 days. Running the new lift will cost $500 a day for entire days. assume lift cost 55.00 a day. The new lift lift has an economic life of 20 years.
Please proofread your post:
"five new chai500 a day???
And just what is your question?
yes,oops add 5 new chair lifts
I am sorry,for not being clear. I need to find out how to figure out NPV
http://www.investopedia.com/terms/n/npv.asp
To calculate the cost and revenue associated with the new lift, we can break down the components and perform calculations step by step.
1. Cost of the lift:
The cost of the lifts is given as $2 million.
2. Cost of installation:
The installation cost for the lift is given as $1.3 million.
3. Cost of running the lift:
The running cost for the lift is given as $500 per day for the entire year. Since there are 365 days in a year, the annual running cost is 365 * $500 = $182,500.
4. Revenue from lift tickets:
The new lift will allow 300 additional skiers on the slopes for 40 days a year. Thus, the total number of lift tickets sold on those 40 days is 300 * 40 = 12,000.
5. Daily revenue from lift tickets:
The lift tickets cost $55 per day. Thus, the daily revenue from lift tickets is 12,000 * $55 = $660,000.
6. Annual revenue from lift tickets:
The lift operates for 40 days a year, so the revenue from lift tickets per year is 40 * $660,000 = $26,400,000.
To determine the profitability of the new lift, we need to consider the costs and revenue over the lifespan of the lift.
7. Economic life of the lift:
The economic life of the lift is given as 20 years.
8. Total cost of the lift:
The total cost of the lift includes the cost of the lift and the installation cost, which is $2 million + $1.3 million = $3.3 million.
9. Total revenue over the lifespan:
To calculate the total revenue over the lifespan, we multiply the annual revenue from lift tickets by the number of years: $26,400,000 * 20 = $528,000,000.
10. Total cost over the lifespan:
To calculate the total cost over the lifespan, we multiply the annual running cost by the number of years: $182,500 * 20 = $3,650,000.
11. Profit over the lifespan:
To calculate the profit over the lifespan, we subtract the total cost from the total revenue: $528,000,000 - $3,650,000 = $524,350,000.
Therefore, the profit over the lifespan of the new lift is $524,350,000.