Net Present Value Method—Annuity for a Service Company Amenity Hotels Inc. is considering the construction of a new hotel for $50 million. The expected life of the hotel is 25 years, with no residual value. The hotel is expected to earn revenues of $30 million per year. Total expenses, including depreciation, are expected to be $23 million per year. Amenity Hotels’ management has set a minimum acceptable rate of return of 14%. a. Determine the equal annual net cash flows from operating the hotel. Round to the nearest million dollars. $fill in the blank 1 million b. Compute the net present value of the new hotel. Use 6.87293 for the present value of an annuity of $1 at 14% for 25 periods. Round to the nearest million dollars. Net present value of hotel project: $fill in the blank 2 million
Amenity Hotels Inc. is considering the construction of a new hotel for $50 million. The expected life of the hotel is 25 years, with no residual value. The hotel is expected to earn revenues of $30 million per year. Total expenses, including
a. Determine the equal annual net cash flows from operating the hotel. Round to the nearest million dollars.
$fill in the blank 1 million
b. Compute the net present value of the new hotel. Use 6.87293 for the present value of an annuity of $1 at 14% for 25 periods. Round to the nearest million dollars.
Net present value of hotel project: $fill in the blank 2 million
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