Question 9

1. Holiday Inn is considering remodeling plans for an older hotel. The building was purchased last year for $980,000. They want to create a modern resort with an estimated cost of $3.9 million. The estimated present value of the future income from this resort is $5.8 million. However, the firm was given a cash offer for the property of $1.6 million as is. Which one of the following represents the opportunity cost of the remodel project?

   	A.	$0
   	B.	$980,000
   	C.	$1,600,000
   	D.	$3,900,000
   	E.	$5,800,000

9 points

Question 10

1. A 5-year project is expected to generate revenues of $92,000, variable costs of $76,000 and fixed costs of $11,000. The annual depreciation is $4,000 and the tax rate is 35%. What is the annual operating cash flow?

   A.

   $3,840

   B.

   $4,650

   C.

   $5,350

   D.

   $10,500

   E.

   $11,100