A nationwide motel chain is considering locating a new motel in Bigtown, USA. The cost of building a 170-room motel (excluding furnishings) is $4.9 million. The firm uses a 12-year planning horizon to evaluate investments of this type. The furnishings for this motel must be replaced every four years at an estimated cost of $1,875,000 (at k = 0, 4, and 8). The old furnishings have no market value. Annual operating and maintenance expenses for the facility are estimated to be $125,000. The market value of the motel after 12 years is estimated to be 25% of the original building cost. Rooms at the motel are projected to be rented at an average rate of $45 per night. On the average, the motel will rent 60% of its rooms each night. Assume the motel will be open 365 days per year. MARR is 12% per year. a. Using an annual-worth measure of merit, is the project economically attractive? b. Investigate sensitivity to decision reversal for the following three factors: (1) capital investment, (2) MARR, and (3) occupancy rate (average percent of rooms rented per night). To which of these factors is the decision most sensitive? Assume that the market value remains constant at the amount used in part a. c. Graphically investigate the sensitivity of the AW to changes in the above three factors. Investigate changes over the interval +50%. On your graph, use percent change as the x-axis and AW as the y-axis. Discrete Compounding; i= 12% Single Payment Uniform Series Compound Amount Capital Recovery Compound Sinking Present Amount Present Fund Worth Factor Factor Worth Factor Factor Factor Factor To Find F To Find P To Find P To Find F To Find A To Find A Given A Given A Given F Given P Given P Given F FIA AIF FIP PIF PIA AIP 1.1200 0.8929 1.0000 0.8929 1.0000 1.1200 2 1.2544 0.7972 2.1200 1.6901 0.4717 0.5917 2.4018 3 1.4049 0.7118 3.3744 0.2963 0.4163 4 1.5735 0.6355 4.7793 3.0373 0.2092 0.3292 1.7623 5 0.5674 6.3528 3.6048 0.1574 0.2774 8.1152 1.9738 0.5066 4.1114 0.1232 0.2432 4.5638 2.2107 0.4523 10.0890 0.0991 0.2191 0.4039 2.4760 12.2997 4.9676 0.0813 0.2013 2.7731 0.3606 14.7757 5.3282 0.0677 0.1877 0.3220 0.0570 10 3.1058 17.5487 5.6502 0.1770 11 3.4785 0.2875 20.6546 5.9377 0.0484 0.1684 24.1331 12 3.8960 0.2567 6.1944 0.0414 0.1614 13 4.3635 0.2292 28.0291 6.4235 0.0357 0.1557 0.0309 0.1509 14 4.8871 0.2046 32.3926 6.6282 0.1827 6.8109 0.1468 15 5.4736 37.2797 0.0268 A nationwide motel chain is considering locating a new motel in Bigtown, USA. The cost of building a 170-room motel (excluding furnishings) is $4.9 million. The firm uses a 12-year planning horizon to evaluate investments of this type. The furnishings for this motel must be replaced every four years at an estimated cost of $1,875,000 (at k = 0, 4, and 8). The old furnishings have no market value. Annual operating and maintenance expenses for the facility are estimated to be $125,000. The market value of the motel after 12 years is estimated to be 25% of the original building cost. Rooms at the motel are projected to be rented at an average rate of $45 per night. On the average, the motel will rent 60% of its rooms each night. Assume the motel will be open 365 days per year. MARR is 12% per year. a. Using an annual-worth measure of merit, is the project economically attractive? b. Investigate sensitivity to decision reversal for the following three factors: (1) capital investment, (2) MARR, and (3) occupancy rate (average percent of rooms rented per night). To which of these factors is the decision most sensitive? Assume that the market value remains constant at the amount used in part a. c. Graphically investigate the sensitivity of the AW to changes in the above three factors. Investigate changes over the interval +50%. On your graph, use percent change as the x-axis and AW as the y-axis. Discrete Compounding; i= 12% Single Payment Uniform Series Compound Amount Capital Recovery Compound Sinking Present Amount Present Fund Worth Factor Factor Worth Factor Factor Factor Factor To Find F To Find P To Find P To Find F To Find A To Find A Given A Given A Given F Given P Given P Given F FIA AIF FIP PIF PIA AIP 1.1200 0.8929 1.0000 0.8929 1.0000 1.1200 2 1.2544 0.7972 2.1200 1.6901 0.4717 0.5917 2.4018 3 1.4049 0.7118 3.3744 0.2963 0.4163 4 1.5735 0.6355 4.7793 3.0373 0.2092 0.3292 1.7623 5 0.5674 6.3528 3.6048 0.1574 0.2774 8.1152 1.9738 0.5066 4.1114 0.1232 0.2432 4.5638 2.2107 0.4523 10.0890 0.0991 0.2191 0.4039 2.4760 12.2997 4.9676 0.0813 0.2013 2.7731 0.3606 14.7757 5.3282 0.0677 0.1877 0.3220 0.0570 10 3.1058 17.5487 5.6502 0.1770 11 3.4785 0.2875 20.6546 5.9377 0.0484 0.1684 24.1331 12 3.8960 0.2567 6.1944 0.0414 0.1614 13 4.3635 0.2292 28.0291 6.4235 0.0357 0.1557 0.0309 0.1509 14 4.8871 0.2046 32.3926 6.6282 0.1827 6.8109 0.1468 15 5.4736 37.2797 0.0268