Question

In: Accounting

1. You decide to purchase a van to transport your hotel guests to and from the...

1. You decide to purchase a van to transport your hotel guests to and from the airport. This is a new service you are adding to your hotel because you have noticed from your STR reports that your competitors are having better occupancy percentages and slightly better ADRs. And after some research, you do have a very comparable product but your current guests have also put in their comment cards that they wish you would provide airport transportation. The cost of the van with the upgrades totals $75,000. You are not charging your guests anything but you have estimated that this new service, you should have an increase in your annual cash flow of $28,000 for the next 5 years. What is the IRR of this van?

Solutions

Expert Solution

computation of IRR
year particulars Amount(in $)
0 initial outflow -75000
1 Revenue (increase incash flow) 28000
2 Revenue (increase incash flow) 28000
3 Revenue (increase incash flow) 28000
4 Revenue (increase incash flow) 28000
5 Revenue (increase incash flow) 28000
IRR for van 25%
verification
year particulars cash flow Discount factor @25% present value of discounted cash flows
a b c d=(1/1.25)^a e=c*d
0 initial outflow -75000 1.000 -75000
1 Revenue (increase incash flow) 28000 0.800 22400
2 Revenue (increase incash flow) 28000 0.640 17920
3 Revenue (increase incash flow) 28000 0.512 14336
4 Revenue (increase incash flow) 28000 0.410 11468.8
5 Revenue (increase incash flow) 28000 0.317 8875.16
0

working note for eference

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Your local hotel has a dining room which has the capacity to seat 140 guests. It...
Your local hotel has a dining room which has the capacity to seat 140 guests. It is opened for breakfast and lunch seven days a week and fully expects to be at capacity at these times. During January 2021, management has forecast the seat turnover for breakfast will be 3 times and for lunch 2 times, with the average bill to be $28 for breakfast and $58 for lunch. Beverage revenue is usually 12 per cent of the breakfast revenue...
When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach
  When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach, perhaps you would be horrified by the high price you would have to pay for a bottle of soft drink such as Coca Cola or Pepsi Cola or wine or even bottled water. Perhaps you begin to ponder why the same commodity that you can get at a supermarket at one tenth the hotel...
When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach
  When you decide to go and have a dinner with your friends in a world class hotel such as the Langham hotel or Coronado Beach, perhaps you would be horrified by the high price you would have to pay for a bottle of soft drink such as Coca Cola or Pepsi Cola or wine or even bottled water. Perhaps you begin to ponder why the same commodity that you can get at a supermarket at one tenth the hotel...
You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is...
You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is willing to finance 70% of the purchase price for 20 years in quarterly installments at 8% per annum mortgage nominal rate. What is the balloon payment you will have to pay, if you want to resell the hotel after 10 years? Consider a fully amortizing fixed rate mortgage. a)      $ 0 b)      $ 1,445,395 c)       $ 1,669,270 d)      $ 1,981,333
Answer the following questions: 1. Guests at a busy eight-story four-star hotel are consistently complaining about...
Answer the following questions: 1. Guests at a busy eight-story four-star hotel are consistently complaining about having to wait too long for the elevator. At 8:00am, some of the elevators are in use by the housekeeping department whose associates are going up to begin work on the guest rooms. At the same time, room service has an elevator blocked off to serve in-room breakfasts because the kitchen and the banqueting departments are using the service elevators. Then, at about 10:30...
Suppose you have decided to purchase an automobile. You analyze your personal budget and decide you...
Suppose you have decided to purchase an automobile. You analyze your personal budget and decide you can afford monthly payments of $506 for five years. If your loan carries an annual interest rate of 12%, what the highest priced car you can afford? a. Excel command ____________ b. answer ____________
You are planning for retirement and must decide whether to purchase only your employer’s stock for...
You are planning for retirement and must decide whether to purchase only your employer’s stock for your 401(k) or, instead, to buy a mutual fund that holds shares in the 500 largest companies in the world. From the perspective of both idiosyncratic and systematic risk, explain how you would make your decision.
Your friends and you decide to purchase a large tract of forest land in northern Minnesota...
Your friends and you decide to purchase a large tract of forest land in northern Minnesota with the intent of generating income from timber and leasing the hunting rights. Your estimated costs and returns are as follows: • $1400/acre purchase price of land, paid back in equal yearly installments over 15 years @ 7% annual interest. • $200/acre site preparation costs incurred immediately. • $250/acre tree planting costs incurred 1 year after purchase. • $100/acre forest management costs incurred 3,...
Suppose you decide to purchase a $150,000 home using an inheritance of $20,000 as your down...
Suppose you decide to purchase a $150,000 home using an inheritance of $20,000 as your down payment. A down payment is subtracted from the total cost of the home and therefore you owe $130,000. To pay for this amount you will need a loan, so $130,000 is the principal on your loan. Suppose the interest rate on a 30 year mortgage is 4.75%. What will your monthly payment be? How much will you pay on the loan if you pay...
You decide to invest $1,000 using a market order.  At the time of your purchase, the order...
You decide to invest $1,000 using a market order.  At the time of your purchase, the order book looked like this: Volume (100s) Price Volume (100s) Price 2 $0.74 4 $0.81 2 $0.72 5 $0.85 3 $0.70 3 $0.88 7 3 10 $0.65 $0.60 $0.01 8 2 2 $0.90 $0.95 $0.99 How many shares did you buy? What was your average purchase price? What would your average purchase price be if your market order been for $2,000? Consider the trader who...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT