1. Based on the projections, how much is the stream of uneven cash flows worth today if the discount rate is 10%? First, compute the present value of each years cash flow individually and add the results. Then, check your answer utilizing the cash flow function.
2. Given the present value calculated in question 1, what will this be worth in 4 years time?

Powell Hospitality Ltd. is proposing the redevelopment of the spa at its Whispering Winds Resort. Currently the spa space is leased to a spa management company, but Powell Hospitality Ltd. wants to bring the operation in-house to have more control. The spa facility will also be expanded from its current 5,000 square feet to 10,000 square feet, with 8,000 square feet of indoor space and 2,000 square feet of outdoor treatment space. massage, herbal wraps, facials, mind/body programs, fitness activities, and alternative health that 180 guests will visit the facility throughout the day. The spa will offer services including sort Hotel r u Addition Powell Hospitality Ltd. believes it is time to expand its facility because the health and fitness industry has experienced rapid growth due to increasing health awareness. The goal of the spa facility will be to offer guests of the resort, visitors to the area, members, and people living and working nearby the opportunity to experience a world-class spa facility. will provide an additional revenue stream for the resort and should increase occu- pancy during the slow periods by offering spa conference packages. On average, it is estimated The spa 219 CHAPTER 7. THE TIME VALUE OF MONEY treatments. Here are some financial projections for the spa: Year 5 65% 75,749 50% $4,003,922 $4,447,775 $1,892,763 $ 72,797 $2,102,585 $ 80,867 WHISTLING WINDS RESORT SPA PROFORMA Year Year 1 Year 2 Year 4 Year 3 Spa Occupancy 60% 55% 29% Spa Services Rendered 33,271 58,269 69,923 64,096 Revenue Spa Services $ 1,760,000 $3,167,075 $3,577,022 Beauty Services $ 832,000 $1,497,163 $1,690,957 Health and Fitness $ 32,000 $ 57,582 $ 65,035 Services Other Revenue $ 576,000 $1,036,497 $1,170,663 Total Spa Revenue $ 3,200,000 $5,758,317 $6,503,677 Cost of Goods Sold $ 160,000 $ 287,915 $ 325,183 Payroll $ 2,304,000 $3,278,150 $3,559,542 $1,310,375 $1,455,637 $7,279,858 $8,086,863 $ 363,992 $ 404,343 $3,901,888 $4,256,566 $1,297,296 $1,404,492 $1,197,812 Operating Expenses $ 896,000 $1,111,380 $1,421,140 $1,716,681 $2,021,462 Gross Operating Income $ (160,000) $1,080,872