1. I am asked to calculate the pre-tax net present value or NPV of a new ski lift for Deer Valley Lodge and report to profitability management. Before I can do this calculation, I first need to do some calculations. First, the total investment amount, it will be the cost of the elevator itself, $2 million, plus the cost of preparing the slope and installing the elevator, $1.3 million . Thus, the investment amount for an elevator is 3.3 million dollars. Next, I will need to know the annual net income from the investment. This will be gross ticket sales minus total spend. Deer Valley is expecting 300 skiers per day for 40 days at $55.00 per ticket, which will bring us $660,000 in ticket sales. In order to calculate total expenses, I need to separate fixed and variable expenses. Fixed fees are those that will be present every day the lodge is open regardless of the number of skiers. The Lodge is open 200 days a year and the cost to operate the new elevator is $500 per day for the entire 200 days, giving us $100,000 in fixed costs. Variable costs are expenses based on the number of customers. There is an additional expense of $5 per skier per day associated with the new lift. If there are 300 skiers times $5 each times the 40 days they are expected to be on the lifts, we will have $60,000 in variable expenses. Fixed costs of $100,000 plus variable costs of $60,000 will give us $160,000 in total expenses. Gross ticket sales of $660,000 less total expenses of $160,000 give us an annual net income of $500,000. The new elevator has an economic lifespan of 20 years and we would like to earn 14% on our investment. The NPV factor of 14% at 20 years is 6.6231. By multiplying our net annual income or annuity of $500,000 by the NPV factor of 6.6231, we will obtain an NPV of $3,311,550. Comparing the NPV to the investment amount, I see that there will be a pre-tax profit of $11,550, which means this could be a good investment.2. I am now asked to calculate the after-tax NPV of a new elevator and advise management on profitability again..