Question
You own a hotel in Bend. The location is killer but the place is run down. Remodeling will cost you $100,000 but generate cash flows
You own a hotel in Bend. The location is killer but the place is run down.
Remodeling will cost you $100,000 but generate cash flows of $50,000 per year for the next five years.
Rebuilding will cost you $300,000 but generate cash flows of $66,000 per year for the next ten years.
Your opportunity cost of capital is 10%
What is the NPV of remodeling the hotel?
What is the NPV of rebuilding your hotel?
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Fundamentals Of Financial Management Concise
Authors: Eugene F. Brigham, Joel F. Houston
11th Edition
0357517717, 9780357517710
