(L. OBJ. 2) Using the payback and accounting rate of return methods to make capital inve...

(L. OBJ. 2) Using the payback and accounting rate of return methods to make capital investment decisions [5—10 min]

Refer to the White Valley Snow Park Lodge expansion project in S20-2. Assume the expansion has zero residual value.

Requirements

1. Will the payback period change? Explain your answer and recalculate if necessary.

2. Will the project’s ARR change? Explain your answer and recalculate if necessary.

3. Assume White Valley screens its potential capital investments using the following decision criteria:

Will White Valley consider this project further, or reject it?