Question
In: Economics
Owners of an economy motel chain are considering building a new 200-unit motel. The present worth...
Owners of an economy motel chain are considering building a new 200-unit motel. The present worth cost of building the motel is $8,000,000 and the firm estimates furnishings for the motel will cost an additional $800,000 and will require replacement every 5 years. Annual operating and maintenance costs for the facility are estimated to be $750,000 and the average rate for a unit is anticipated to be $50/day. A 15 year planning horizon is used by the firm for ventures of this type; a terminal salvage value of 15% of the original building cost is anticipated, and furnishings have no salvage value at the end of each replacement cycle. Assuming average daily occupancy percentages of 50%, 60%, 70%, 80% for years 1 through 4, respectively, and 90% for years 5-15, MARR of 12%, 365 operating days per year and ignoring the cost of the land, should the motel be built? Make your decision using each of the following measures of worth:
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Owners of an economy motel chain are considering building a new 200-unit motel. The present worth...
Owners of an economy motel chain are considering building a new
200-unit motel. The present worth cost of building the motel is
$8,000,000 and the firm estimates furnishings for the motel will
cost an additional $800,000 and will require replacement every 5
years. Annual operating and maintenance costs for the facility are
estimated to be $750,000 and the average rate for a unit is
anticipated to be $50/day. A 15 year planning horizon is used by
the firm for ventures...
Owners of an economy motel chain are considering building a new 200-unit motel in Riverside, CA....
Owners of an economy motel chain are considering building a new
200-unit motel in Riverside, CA. The present worth cost of building
the motel is $8,000,000; the firm estimates furnishings for the
motel will cost an additional $800,000 and will require replacement
every 5 years. Annual operating and maintenance costs for the
facility are estimated to be $800,000. The average rate for a unit
is anticipated to be $60/day. A 15-year planning horizon is used by
the firm in evaluating...
Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The...
Value Lodges owns an economy motel chain and is considering
building a new 200-unit motel. The cost to build the motel is
estimated at $320,000; Value Lodges estimates furnishings for the
motel will cost an additional $620,000 and will require replacement
every 5 years. Annual operating and maintenance costs for the motel
are estimated to be $140,000. The average rental rate for a unit is
anticipated to be $30/day. Value Lodges expects the motel to have a
life of 15...
Owners of a motel chain are considering a new investment. The cost of the 125-unit motel...
Owners of a motel chain are considering a new investment. The
cost of the 125-unit motel (excluding furnishings) is $10 million
and the furnishings, which cost $2 million must be replaced every
five years (with no salvage value). The annual O&M costs are
$200,000 per year, the average daily room rate is $110/day
(increasing by 3% per year), and the buildings will be sold in 15
years for 20% of the original building cost. Ignoring taxes, if the
motel operates...
Goodfood is a supermarket chain. During the current year it started building a new store. The...
Goodfood is a supermarket chain. During the current year it
started building a new store. The directors are aware that in
accordance with IAS23 Borrowing costs certain borrowing
costs have to be capitalised.
Details relating to the construction of Goodfood’s new
store:
Goodfood took out a €10 million loan with an interest rate of
7.5% per annum on 1 April 2017. The loan was specifically taken to
finance the building of the new store which meets the definition of
a...
A retailer is considering building a large store. If the local economy experiences expansion, the firm...
A retailer is considering building a large store. If the local economy experiences expansion, the firm expects the store to earn a $2,000,000 profit next year. If the local economy experiences a contraction, the firm expects the store to lose $400,000 next year. Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction). What is the expected monetary value (EMV) of building the large store
Acme Development Company is considering building a twenty-five (25) unit apartment building near Catholic University due...
Acme Development Company is considering building a twenty-five
(25) unit apartment building near Catholic University due to the
demand for off-campus student housing. Given the unique needs of
the student population, Acme anticipates they will achieve 75%
occupancy over the course of a year. Acme is basing their decision
on the following assumptions:
MARR:15%
Land Acquisition:$150,000
Construction Cost:$2,250,000
Investment Period:20-years
Maintenance Expenses:Years 1 to 10: $500 per unit, Years 11 to
20: $1,000 per unit
...
A student is considering publishing a new magazine aimed directly at owners of Japanese automobiles. He...
A student is considering publishing a new magazine aimed
directly at owners of Japanese automobiles. He wanted to estimate
the fraction of cars in the United States that are made in Japan.
The computer output below summarizes the results of a random sample
of 50 autos.
z-interval for
proportion
With 90.00%
confidence
0.29938661 < p(japan) <
0.46984416
Interpret the computer output.
Explain what “90% confidence” means.
c. A politician urging consumers to purchase products
manufactured in the United States says,...
5. (5 pts) Conduct a present worth analysis on a new piece of vision computer technology...
5. (5 pts) Conduct a present worth analysis on a new piece of
vision computer technology is being proposed to increase the
productivity of your physical therapy facility. Your investment
cost is $35,000, and the technology will have a market value of
$5,000 at the end of 5 years. Your benefits are $11,000 per year
with the purchase of the new vision computer technology. There is
an annual subscription fee of $1,000. If your MARR is 15% per year,
is...
5. (5 pts) Conduct a present worth analysis on a new piece of vision computer technology...
5. (5 pts) Conduct a present worth analysis on a new piece of
vision computer technology is being proposed to increase the
productivity of your physical therapy facility. Your investment
cost is $35,000, and the technology will have a market value of
$5,000 at the end of 5 years. Your benefits are $11,000 per year
with the purchase of the new vision computer technology. There is
an annual subscription fee of $1,000. If your MARR is 15% per year,
is...
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