Ch.26 Interactive HW + video eBook Show Me How E Print Item Net Present Value Method-Annuity for a Service Company 1. PE.26-01.ALGO 2. PE.26-02.ALGO Welcome Inn Hotels is considering the construction of a new hotel for $63 million. The expected life of the hotel is 8 years with no residual value. The hotel is expected to earn revenues of $19 million per year. Total expenses, including depreciation, are expected to be $13 million per year. Welcome Inn management has set a minimum acceptable rate of return of 11%. Assume straight-line depreciation. 3. PE.26.03.ALGO a. Determine the equal annual net cash flows from operating the hotel. Round to the nearest million dollars. million 4. PE.26-04.ALGO 5. PE.26-05.ALGO Present Value of an Annuity of $1 at Compound Interest Periods 8% 9% 10% 11% 12% 13% 14% 6. EX.26-01.ALGO 1 0.92593 0.91743 0.90909 0.90090 0.89286 0.88496 0.87719 2. 1.78326 1.75911 1.73554 1.69005 1.71252 1.66810 7. EX.26-03.ALGO 1.64666 3 2.57710 2.53129 2.48685 2.44371 2.40183 2.36115 2.32163 8. EX.26-04.ALGO 4 3.31213 3.23972 3.16987 3.10245 3.03735 2.97447 2.91371 5 9. EX.26-05.ALGO 3.99271 3.88965 3.79079 3.69590 3.60478 3.51723 3.43308 6 4.62288 4.48592 4.35526 4.23054 4.11141 3.99755 3.88867 10. EX.26-07.ALGO 7 5.20637 5.03295 4.86842 4.71220 4.56376 4.42261 4.28830 8 5.74664 5.53482 5.33493 5.14612 4.96764 4.79677 4.63886 11. EX.26-09.ALGO 9 6.24689 5.99525 5.75902 5.53705 5.32825 5.13166 4.94637 12. EX.26-19.ALGO 10 6.71008 6.41766 6.14457 5.88923 5.65022 5.42624 5.21612 b. Calculate the net present value of the new hotel using the present value of an annuity of $1 table above. Round to the nearest million dollars. If required, use the minus sign to indicate a negative net present value. . Net present value of hotel project: $ million c. Does your analysis support the purchase of the new hotel? , because the net present value is