You, as a negotiating member of the Acosta S.A. hotel chain, have been entrusted with evaluating the convenience of investing 5 MMUSD in the construction of a new 4-star hotel through a joint venture that will last for 5 years.

The cost of the initial investment is broken down as follows:

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The total working capital required in the first year of operation is estimated at 0.65 MMUSD, remaining constant until the end of the association period, at which time it is estimated that the same nominal value of 0.7 MMUSD can be obtained. The value of the land is fully recovered at the end of the period through its sale, valued at 1.5 MMUSD. Buildings and equipment are amortized on a straight-line basis, reporting between them a residual value of 0.5 MMUSD. The inflation rate that affects these assets is 5%. The income will be $2,000.00 for each tourist and these will rise to the figure of 5,000. The inflation rate on sales is estimated to be 6%.

Annual operating costs are estimated at 60% of the face value of annual revenues.

The tax rate will be 30%.

The nominal discount rate is 15%.

Say if you would recommend doing the business, to do so, evaluate each of the criteria studied.