Table 2. Depreciation Consideration Salvage value Life for tax purposes $0.00 5 years The management team of Tanford Hotel evaluates the feasibility of this technology project. They predict that room sales revenue can be increased by 3% each year because of the ability to reach out to new customers with the new reservation system. The estimated expenses for the next 5 years would be the following: Table 3. Project Expenses 2021 2022 2023 2024 2025 Depreciation $ 144,000 $144,000 $144,000$ 144,000 144,000 Training and technical support 36,000 36,000 36,000 36,000 36,000 Maintenance and updates 36,000 36,000 36,000 36,000 36,000 Tanford Hotel uses accept/reject criteria for the investment decision as below: Table 4. Accept/Reject Criteria Payback = 3 years IRR -16% NPV > PI>1 Requirements: 1. Using budgeted income statements in Part 1, determine the annual net income. Note: You have to use "revenue incremental" for the project revenue. Tanford Hotel's tax rate is 21% Net Income Revenue incremental - expenses - taxes 2. Using the information provided, determine the annual net cash flows from the proposed investment. 3. Determine the NPV, IRR, PI and payback period. Note: Discount rate is 12% 4. Make a decision based on the analysis G H Task 1. Estimate Incremental Revenue Expenses, and Annual Incomes 2022 2021 2024 2025 2026 Revenue forecast Incremental revenue Project expenses Depreciation Training and technical support Maintenance and updates Pretax Income Taxes (21%) Net Income Task 2. Determine the Annual Cash flow. 2022 2023 2024 2025 2026 Net Income Add: Depreciation Total Task 3. Determine Payback period, NPV, IRR. PI and Payback period Decision 1 2 NPV- IRR- PL- Payback Task 4. Based on the analysis, make a decision on the investment. Part 2. Problem Part2.Response Sheet Cover Part 1. Problem Parts Response Sheet PARTLOPERATIONS BUDGET w . . I Talleri IN LB Hung Theme 2. Espe Berlin 10 . Table 2. Depreciation Consideration Salvage value Life for tax purposes $0.00 5 years The management team of Tanford Hotel evaluates the feasibility of this technology project. They predict that room sales revenue can be increased by 3% each year because of the ability to reach out to new customers with the new reservation system. The estimated expenses for the next 5 years would be the following: Table 3. Project Expenses 2021 2022 2023 2024 2025 Depreciation $ 144,000 $144,000 $144,000$ 144,000 144,000 Training and technical support 36,000 36,000 36,000 36,000 36,000 Maintenance and updates 36,000 36,000 36,000 36,000 36,000 Tanford Hotel uses accept/reject criteria for the investment decision as below: Table 4. Accept/Reject Criteria Payback = 3 years IRR -16% NPV > PI>1 Requirements: 1. Using budgeted income statements in Part 1, determine the annual net income. Note: You have to use "revenue incremental" for the project revenue. Tanford Hotel's tax rate is 21% Net Income Revenue incremental - expenses - taxes 2. Using the information provided, determine the annual net cash flows from the proposed investment. 3. Determine the NPV, IRR, PI and payback period. Note: Discount rate is 12% 4. Make a decision based on the analysis G H Task 1. Estimate Incremental Revenue Expenses, and Annual Incomes 2022 2021 2024 2025 2026 Revenue forecast Incremental revenue Project expenses Depreciation Training and technical support Maintenance and updates Pretax Income Taxes (21%) Net Income Task 2. Determine the Annual Cash flow. 2022 2023 2024 2025 2026 Net Income Add: Depreciation Total Task 3. Determine Payback period, NPV, IRR. PI and Payback period Decision 1 2 NPV- IRR- PL- Payback Task 4. Based on the analysis, make a decision on the investment. Part 2. Problem Part2.Response Sheet Cover Part 1. Problem Parts Response Sheet PARTLOPERATIONS BUDGET w . . I Talleri IN LB Hung Theme 2. Espe Berlin 10
