Hideaway Hotels is considering the construction of a new hotel for $150 million. The expected life of

Question:

Hideaway Hotels is considering the construction of a new hotel for $150 million. The expected life of the hotel is 30 years with no residual value. The hotel is expected to earn revenues of $44 million per year. Total expenses, including depreciation, are expected to be $25 million per year. Hideaway management has set a minimum acceptable rate of return of 14%.
(a) Determine the equal annual net cash flows from operating the hotel.
(b) Calculate the of the new hotel using the present value factor of an of $1 at 14% for 30 periods of 7.0027. Round to the nearest million dollars.
(c) Does your analysis support construction of the new hotel?

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