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The Rose Hall Resort Ltd. is in the 34% tax bracket with a 15 percent required...

The Rose Hall Resort Ltd. is in the 34% tax bracket with a 15 percent required rate of return (or cost of capital) and is considering a new project. This project involves the acquisition of a portfolio of 4 boutique hotels at a cost of $62,016,176.

Use the data below to calculate the project’s:  

  • Payback
  • NPV
  • PI
  • IRR

                                     Year 1              Year 2              Year 3              Year 4                Year 5v

Gross Profit             $23,700,000     $30,900,000     $38,100,000     $23,700,000     $16,900,000

Depreciation               4,240,000          4,240,000         4,240,000         4,240,000        4,240,000

EBT                          19,460,000       26,660,000       33,860,000       19,460,000       12,660,000

Less: Taxes                  6,616,400         9,064,400       11,512,000         6,616,400         4,304,400

Net Income                12,843,600       17,595,600       22,348,000       12,843,600         8,355,600

Solutions

Expert Solution

We can calculate the desired results in Excel sheet as follows

Formulas used in the excel sheet are

So the Answer are

Payback = 2.87 years

NPV = $ 2,861,601

PI = 5% ( 4.61% Rounded to 2 decimal places )

IRR = 17%

Hope I am able to solve your concern. If you are satisfied hit a thumbs up !!

jeff jeffy answered 1 year ago
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