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Outside In Hotels is considening the construction of a new hotel for $80 million. The expected ufe of the hotel is 5 years with no
Outside In Hotels is considening the construction of a new hotel for $80 million. The expected ufe of the hotel is 5 years with no residual value, The hotel is expected to earn revenues of $21 miltion per year. Total expenses, including depreciation, are expected to be $16 malion per year. Outside inn management has set a minimum acceptable rate of return of 8%. Assume straight-line depreciation. Present Value of an Annuitv of $1 at Compound Interest a. Determine the equal annual net cash flows from operating the hotel, Round to the nearest million dollars. x milion b. Compute the net present value of the new hotel using the present valun of an aninuty of $1 tabie above. Round to the nearest million dollars, If required, use the minus sign to ind cate a negative net present value. Net present value of hotel project: s x milion
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