Do not do it on Excel

Owners of an economy motel chain are considering building a new 200-unit motel. The present worth cost of building the motel is $8,000,000 and the firm estimates furnishings for the motel will cost an additional $800,000 and will require replacement every 5 years. Annual operating and maintenance costs for the facility are estimated to be $750,000 and the average rate for a unit is anticipated to be S50/day. A 15 year planning horizon is used by the firm for ventures of this type; a terminal salvage value of 15% of the original building cost is anticipated, and furnishings have no salvage value at the end of each replacement cycle. Assuming average daily occupancy percentages of 50%, 60%, 70%, 80% for years 1 through 4, respectively, and 90% for years 5-15 MARR of 12%, 365 operating days per year and ignoring the cost of the land, should the motel be built? Make your decision using each of the following measures of worth a. Present Worth b. IRR