Net Present Value Method-Annuity for a Service Company Welcome Inn Hotels is considering the construction of a new hotel for $81 million. The expected ife of the hotel is 7 years with no residual value. The hotel is expected to earn revenues of $22 million per year. Total expenses, including depreciation, are expected to be $16 million per year. Welcome Inn management has set a minimum acceptable rate of return of 9%. Assume straight-line depreciation a. Determine the equal annual net cash flows from operating the hotel. Round to the nearest million dollars million Present Value of an Annuity of $1 at Compound Interest Periods 8% 1 2 3 4 0.92593 1.78326 1.75911 2.53129 2.57710 3.31213 3.23972 9% 0.91743 14% 11% 12% 13% 10% 0.90090 0.90909 0.89286 0.88496 0.87719 1.66810 1.64666 1.73554 1.71252 1.69005 2.40183 2.44371 2.36115 2.32163 2.48685 3.16987 3.10245 3.03735 2.97447 2.91371 5 3.99271 3.88965 3.60478 3.69590 3.79079 3.51723 3.43308 6 7 5.20637 8 5.74664 9 10 6.24689 6.71008 4.35526 4.62288 4.48592 4.56376 4.71220 4.86842 5.03295 4.79677 4.63886 4.96764 5.14612 5.33493 5.53482 5.32825 5.13166 4.94637 5.53705 5.75902 5.99525 5.21612 5.65022 5.42624 5.88923 6.14457 6.41766 4.11141 4.23054 3.99755 3.88867 4.42261 4.28830 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 Previous Next