. Jinny Buffett recently retired as a flight attendant and is Interested in opening a fitness center and health spa exclusively for women in Grand Cayman, where she resides. After careful study, she is somewhat puzzled as to how to proceed. In her words, "I see my business going in one of two directions: Elther I open the fitness center and health spa all at once, or I start with the health spa and hold off on the fitness center for a while. Either way. It should be a success because women on this Island love to be pampered. My only concern about the fitness center is the initial cost, but if the projections look good enough, I know some investors in Phoenix who can help me get started. In any event, I plan to retire permanently in 13 years." Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) The following Information is available: Jinny has identified a suitable location for her business in a new shopping center in George Town, capital of the Cayman Islands, The developer has units of 1750 square feet and 3.250 square feet available and is willing to sell elther unit for CI$150 per square foot (C1$1.00 - US$125) Alternatively, the space can be leased at a cost of C|$1.80 per square foot per month, on an annual basis. Commercial real estate values have more than doubled in Grand Cayman during the past 13 years, with no slowdown in sight. As a result, Jinny is more attracted to the purchase option because she expects the price per square foot to be C1$450 by the time she Is ready to sell her unit in 13 years. Exercise machines and other equipment necessary to open the fitness center would cost US$45.000. In addition, US$34.000 would need to be invested in equipment related to the health spa. The useful life for all such equipment is 13 years, and the expected salvage value is not large enough to be concerned about In addition, US$7.000 would need to be invested in an inventory of cosmetics and skin care products necessary to operate the health spa. This level of inventory would need to be maintained throughout the 13-year period and will be given away to loyal customers when Jinny retires permanently The health spa can be operated in the 1760-square-foot unit. Variable operating costs would include C1$0.25 per square foot per month for cleaning and C1$0 40 per square foot per month for utilities. The 3.250 square foot unit is large enough to operate both the fitness center and health spa, and the C150 25 rate per square foot for cleaning would not change. However, if the 3.250 square foot unit were used the health spa would be located in an open loft that would need to be air-conditioned at all times. As a result, utility costs are expected to be Ci$0.60 per square foot per month under this option Jinny is a certified aesthetician and expects to do most of the makeovers, facials, and pools herself, but she needs a qualified assistant for the health spa. She estimates that hiring an appropriate person will cost US$21,000 per year. Likewise, for the fitness center, two full time aerobics Instructors would be hired for US$21,000 each per year, and a physical trainer would be hired for . Additional fixed costs include US$3,500 per year for advertising and US$4.700 per year for maintenance, insurance, and other . Annual membership fees to the fitness center will be C15300, and a preliminary market survey shows a demand of approximately 550 initial members. Although members tend to come and go, the not change in membership from yoar to year is not expected to be significant. No additional fees will be charged to fitness center members Health spa fees are accessed on a user basis, although the steam room facilities are available at no charge to ftness center members. The net cash inflow from cosmetics and skin care products after deducting the cost of inventory used and cold) is expected to be C$7,500 per month Jinny's cost of capital is 10% and there are no taxes in the Cayman Islands . y coul of capital and there are no taxes in the Cayman Islands, Required: a. Calculate the net present value in US$ of an investment in the health spa only, assuming that the 1750-square-foot unit is purchased and then resold at the end of 13 years. (Hint: Before making your present value calculations, multiply all amounts expressed in as by $1.25 to convert Into US$) b. Calculate the net present value in US$ of an investment in the fitness center and health spa, assuming that the 3,250-square-foot unit is purchased and then resold at the end of 13 years Jinny is quite concerned about possible forecasting errors and has asked you to prepare a more conservatve estimate. Repeat part b, assuming that the fitness center attracts only 350 members per year rather than 550k that the net cash inflow per month from cosmetics and skin care products is only C1$5,500 per month (rather than C1$7,500 per month and that commercial real estate values in Grand Cayman at the end of 13 years are only $200 per square foot (rather than Ci$450 per square foot d. Choose why it might be in Jinny's Best Interest to lense (rather than purchase the 1750-square-foot unit if she initially decides to opon the health spa only. Althougino calculations are required, you chould consider both quantitative and qualitative factors in your response Complete this question by entering your answers in the tabs below. Required A Required Required Required Calculate the ne present value in US$ of an investment in the health spaanly, assuming that the 1.750-square-foot unit is purchased and then resold at the end of 13 years. (Hint. Before making your present value calculations, multiply all amounts expressed in Cls by $1.25 to convert into USS Nepentvale Required> Complete this question by entering your answers in the tabs below. Required A Required Required RD Calculate the net present value in US$ of an investment in the fitness center and health spa, assuming that the 3.250-square- foot unit is purchased and then resold at the end of 13 year Net present value Complete this question by entering your answers in the tabs below. Required A Required B Required D Jinny is quite concerned about possible forecasting errors and has asked you to prepare a more conservative estimate. Repeat part b, assuming that the fitness center attracts only 350 members per year (rather than 550), that the net cash inflow per month from cosmetics and skin care products is only CI$5,500 per month (rather than CIS7.500 per month), and that commercial real estate values in Grand Cayman at the end of 13 years are only CIS200 per square foot (rather than CI$450 per square foot) (Do not round Intermediate calculations. Negative amounts should be indicated by a minus sign. Show less Net present value