The McVan Hotel Syndicate owns four report hotels in southern lowa and Missouri. Because their Hermann, Missouri operation (Hotel 3) has been booming over the past three years, management has decided to add a new wing to increase capacity by 20%. A construction firm has bid on the proposed new wing. The Building would have a 20-year life, and the company uses straight-line depreciation. Deluxe accomodations are high lighted in this contractor's proposal. The new wing would cost Rs.29,000,000 to construct, have a salvage value of Rs.2,900,000, and is expected to generate the following cash flows: Increase in Increase in Cash inflows Cash operating Years from Room Rentals Expenses 1 -7 (each year) 17,900,000 12,800,000 8 20,000,000 14,600,000 9 22,100,000 15,900,000 10 - 20 (each year) 24,200,000 17,700,000 Capital investment projects must generate a 12% after tax minimum desired rate of return to qualify for construction. Assume a 34% tax rate. REQUIRED: Evaluate the proposal from the contractor using net present value analysis, an make a recommendation to management