Net Present Value MethodAnnuity for a Service Company Welcome Inn Hotels is considering the construction of a new hotel for $60 million The expected life of the hotel is 19 years with no residual value The hotel is expected to earn revenues of $18 million per year Total expenses, including depreciation, are expected to be $12 million per year Welcome Inn management has set a minimum acceptable rate of return of 12 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 9 10 11 12 13 14 1 0 92593 0 91743 0 90909 0 90090 0 89286 0 88496 0 87719 2 1 78326 1 75911 1 73554 1 71252 1 69005 1 66810 1 64666 3 2 57710 2 53129 2 48685 2 44371 2 40183 2 36115 2 32163 4 3 31213 3 23972 3 16987 3 10245 3 03735 2 97447 2 91371 5 3 99271 3 88965 3 79079 3 69590 3 60478 3 51723 3 43308 6 4 62288 4 48592 4 35526 4 23054 4 11141 3 99755 3 88867 7 5 20637 5 03295 4 86842 4 71220 4 56376 4 42261 4 28830 8 5 74664 5 53482 5 33493 5 14612 4 96764 4 79677 4 63886 9 6 24689 5 99525 5 75902 5 53705 5 32825 5 13166 4 94637 10 6 71008 6 41766 6 14457 5 88923 5 65022 5 42624 5 21612 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 minus sign to indicate a negative net present value Net present value of hotel project $ million c Does your analysis support the purchase of the new hotel YES, NO , because the net present value is (NEGATIVE, POSTIVE) Lean Accounting The annual budgeted conversion costs for a lean cell are $230,040 for 2,700 production hours Each unit produced by the cell requires 15 minutes of cell process time During the month, 1,050 units are manufactured in the cell The estimated materials cost is $57 per unit Provide the following journal entries (Do not round interim calculations If required, round your answers to the nearest dollar ) a Materials are purchased to produce 1,110 units b Conversion costs are applied to 1,050 units of production c 1,000 units are completed and placed into finished goods s

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Net Present Value MethodAnnuity for a Service Company Welcome Inn Hotels is considering the construction of a new hotel for $60 million. The expected life

Net Present Value MethodAnnuity for a Service Company

Welcome Inn Hotels is considering the construction of a new hotel for $60 million. The expected life of the hotel is 19 years with no residual value. The hotel is expected to earn revenues of $18 million per year. Total expenses, including depreciation, are expected to be $12 million per year. Welcome Inn management has set a minimum acceptable rate of return of 12%. 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%	9%	10%	11%	12%	13%	14%
1	0.92593	0.91743	0.90909	0.90090	0.89286	0.88496	0.87719
2	1.78326	1.75911	1.73554	1.71252	1.69005	1.66810	1.64666
3	2.57710	2.53129	2.48685	2.44371	2.40183	2.36115	2.32163
4	3.31213	3.23972	3.16987	3.10245	3.03735	2.97447	2.91371
5	3.99271	3.88965	3.79079	3.69590	3.60478	3.51723	3.43308
6	4.62288	4.48592	4.35526	4.23054	4.11141	3.99755	3.88867
7	5.20637	5.03295	4.86842	4.71220	4.56376	4.42261	4.28830
8	5.74664	5.53482	5.33493	5.14612	4.96764	4.79677	4.63886
9	6.24689	5.99525	5.75902	5.53705	5.32825	5.13166	4.94637
10	6.71008	6.41766	6.14457	5.88923	5.65022	5.42624	5.21612

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 minus sign to indicate a negative net present value. Net present value of hotel project: $ million

c. Does your analysis support the purchase of the new hotel? YES, NO , because the net present value is . (NEGATIVE, POSTIVE)

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Lean Accounting The annual budgeted conversion costs for a lean cell are $230,040 for 2,700 production hours. Each unit produced by the cell requires 15 minutes of cell process time. During the month, 1,050 units are manufactured in the cell. The estimated materials cost is $57 per unit. Provide the following journal entries: (Do not round interim calculations. If required, round your answers to the nearest dollar.) a. Materials are purchased to produce 1,110 units. b. Conversion costs are applied to 1,050 units of production. c. 1,000 units are completed and placed into finished goods. s