Some Internet booking sites operate by letting guests bid for hotel rooms at whatever price the guest is willing to pay. In such cases, guests may not know the hotel they will be reserving at the time of their bid. If the guest’s bid is successful (i.e., if a hotel is willing to sell a room for the suggested bid price), a nonrefundable reservation is made. If you were managing a front office, would you want your hotel to participate in such an arrangement? Explain your reasoning.

ABC Company built a new factory building during 20X5 at a cost of $ 20 million. As of December 31, 20X5, the net book value of the building was $ 19 million. After the end of the year, on March 15, 20X6, the building caught fire and the claim against the insurance company was in vain because the cause of the fire was the negligence of the building caretaker. If the financial statement approval date for the year ending December 31, 20X5, is March 31, 20x6, the company must....
A. Remove the net book value of the residual value because the insurance claim will not provide any reimbursement.
B. Make a provision equal to half the net book value of the building.
C. Make a provision of three quarters of the net book value of a building based on the precautionary principle
D. Disclose this event in the notes to the Financial Statements.

China's Galanz built a new complex at the expected cost of 2 billion yuan in order to produce 12 million air-conditioning units annually. The site was completed in 2004.
1 Make the following assumptions:

•The actual investment cost is either 1.9, 2.0, or 2.1 billion yuan, with respective probabilities of 0.25,0.50, and 0.25.
•The plant operates for 15 years, with the salvage value being either 50 million, 0, or-100 million(remediation costs) yuan at that time, with probabilities of 0.20,0.50, and 0.30, respectively.
•Finally, the net cash flow resulting from operations and sales is 60 yuan per unit. The number of units sold in each year is either 9 (0.1), 10 (0.2), 11 (0.3), or 12 (0.4) million. The figures in
parentheses represent the probabilities of the given level of production.

Assume that these are the only relevant cash flows and the interest rate is 18% per year.

a) Find an expression for the present worth (PW).

b) Find the expected value of the PW(if possible).

c) Find the standard deviation of the PW(if possible).

d)Find Pr(PW >0) (if possible).

e)Perform 200 simulations, and find the sample mean, standard deviation, as well as the probability that the investment will have a positive PW (point & interval estimates). Finally, summarize your process (which will naturally include all the appropriate steps) and results

Your client built a house in 2012 at a cost of $2 million. During Harvey storm, the house got flooded and there was a 2 ft. water in the house. He finished remodeling the house in 2018 at a cost $150,000. The approximate square feet of the house is 10,000. The fair market of the house before the flood damage was 2,125,000 and the fair market value after the flood damage was $1,500,000. There was a considerable damage to the furniture, fixtures and other contents of the house. Calculate Casualty loss from the house assuming his AGI for 2017 is $350,000. File IRS-form 4684

Your client built a house in 2012 at a cost of $2 million dollars. During Harvey storm, the house got flooded and there was 2 ft. of water in the house. He finished remodeling the house in 2018 at a cost of $150,000. The approximate square feet of the house is 10,000. The fair market of the house before the flood damage was $2,125,000 and the fair market value after the flood damage was $1,500,000. There was a considerable damage to the furniture, fixtures and other contents of the house. Calculate Casualty loss from the house assuming his AGI for 2017 is $350,000. He had no flood insurance. (3 children, one in college and two other small children)

Fill out form 4684 - casualty loss  

Explain how you came up with the calculations.  

Investment Timing Option: Decision-Tree Analysis

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $18 million. Kim expects the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%.

1. What is the project's net present value? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.

   $    million

2. Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $3.8 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $18 million. Assume that all cash flows are discounted at 13%. Use decision-tree analysis to determine whether Kim should proceed with the project today or wait a year before deciding.

Investment Timing Option: Option Analysis

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $20 million. Kim expects the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%.

Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $3.8 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $20 million. Assume that all cash flows are discounted at 13%. Use the Black-Scholes model to estimate the value of the option. Assume that the variance of the project's rate of return is 0.0585 and that the risk-free rate is 6%. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to three decimal places.

Use computer software packages, such as Minitab or Excel, to solve this problem.

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Investment Timing Option: Option Analysis Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $20 million. Kim expects the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%. Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $3.8 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $20 million. Assume that all cash flows are discounted at 13%. Use the Black-Scholes model to estimate the value of the option. Assume that the variance of the project's rate of return is 0.0687 and that the risk-free rate is 6%. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to three decimal places. Use computer software packages, such as Minitab or Excel, to solve this problem. $ million

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $16 million. Kim expects the hotel will produce positive cash flows of $2.56 million a year at the end of each of the next 20 years. The project's cost of capital is 12%.

A) What is the project's net present value? A negative value should be entered with a negative sign. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to two decimal places.

B) Kim expects the cash flows to be $2.56 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $1.6 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $3.52 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $16 million. Assume that all cash flows are discounted at 12%. Use decision-tree analysis to determine whether Kim should proceed with the project today or wait a year before deciding. Answers: 1) wait a year 2) decide now

Investment Timing Option: Option Analysis

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $20 million. Kim expects the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%.

Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $3.8 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $20 million. Assume that all cash flows are discounted at 13%. Use the Black-Scholes model to estimate the value of the option. Assume that the variance of the project's rate of return is 0.0585 and that the risk-free rate is 6%. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answer to three decimal places.

Use computer software packages, such as Minitab or Excel, to solve this problem.

$ ??? million