Illinois Investments is considering purchasing a 50-room motel for sale outside of Atlanta as an investment. The current owners state that the motel's occupancy rate averages 80 percent each of the 300 days per year the motel is open. Each room rents for $70 per day, and variable cash operating costs are $20 per occupancy day. Fixed annual cash operating costs are $250,000.

Rita Riley, Illinois Investments' owner, is considering paying $1,500,000 for the motel. Illinois Investments would keep the motel for 14 years and then dispose of it.

Because the market for motels is difficult to predict, Riley estimates a zero salvage value at the time of disposal. Depreciation will be taken on a straight-line basis for tax purposes. Riley's tax rate is estimated at 25 percent for all years.

a. Determine the after-tax net present value of the motel to Illinois Investments, assuming a cost of capital rate of 10 percent.

b. What is the highest discount rate that will allow this project to be considered acceptable to Illinois Investments?

c. What is the minimum amount the net after-tax cash flows must be to allow the project to be considered acceptable by Illinois Investments, assuming a cost of capital rate of 10 percent?

d. What is the fewest number of years for which the net after-tax cash flows can be received and the project still be considered acceptable?