Chupka Aptia grew up in the hotel business. Her parents owned and operated a 100-room limited-service hotel for 20 years. When Chupka graduated from hospitality school, her parents retired, turning the business over to Chupka. Her hotel has an appraised value of $6,000,000 and total mortgage debt of $2,000,000 and her initial owners equity was $4,000,000. The franchisor with which Chupkas property is associated has approached her to see if Chupka would like to develop a second property that would be located 10 miles from her current hotel. The franchisor is proposing a 100-room property, which can be built at a cost of $8,000,000. In addition, the franchisor has indicated that a special financing arrangement has been put in place that allows existing franchisees to obtain 100% financing if their current properties score in the top 10% of the franchisors annual inspection program. Chupkas property qualifies for the special financing offer.

1- Develop the accounting equation for Chupkas hotel as it exists prior to constructing the new hotel. 2- Develop the accounting equation for Chupkas two properties, as it would exist if she built the new hotel. 3- Assume you were advising Chupka. - What would you tell her about the impact of the new hotel on the assets, liabilities, and owners equity portions of her new accounting equation? - What do you believe are the key factors Chupka should consider before agreeing to build the new property?