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Hi , could you please explain how I would calculate this and what I should put into my calculator: A newly constructed 3 0 -
Hi could you please explain how I would calculate this and what I should put into my calculator:
A newly constructed floor hotel if opened now time could begin to yield an annual rental income of from year Alternatively, the building could be extended by one extra floor being added at a cost of incurred in year though this would mean that the hotel would be unoccupied in year and all revenues for that year would be lost. The revenue from the extra floor would amount to per year in all years to after which the building will be worthless.
i In terms of the decision to construct the extra floor, sketch a time line years to of the cash flows.
ii Show with clear workings that the internal rate of return of adding the extra floor is between and You may use the tables provided.
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