Question

1.     Park City Mountain Resort, a Utah ski resort, announced a $415 million expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $80 million in equal annual cash inflows for each of the first 10 years of the project life. Calculate the expected internal rate of return for this project.

Expected internal rate of return:___________________

Answer 1

Expected Internal rate of return for this project (IRR) = 14% (Rounded)

Internal Rate of Return Factor = Net Initial Investment / Annual Cash Flow

                                                = $415 million / $80 million

                                                = 5.1875

From the Present Value Annuity Factor Table, We can find that the discount rate (IRR) corresponding to the factor of 5.1875 for 10 Years Will be 14.14%

" Investment's IRR = 14% (Rounded) "