A.
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.

Year                                    ₵

   0                                     ( 100,000)    
   
   1                                      20,000
  
   2                                      25,000

   3                                      32,000

   4                                      35,000

(i) Using the CAPM approach, what is the cost of equity on this project?

(ii) Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt?

(iii) What will be the weighted average cost of capital (WACC)?

(iv) Using the WACC computed in (c), what will be the NPV of the investment? `
(v) Compute the IRR for the project?
(vi) What will be your overall advice concerning viability of the project?

(a) Explain the following statement under the Malaysian Contract Law : “Consideration must be sufficient but need not be adequate.”

(b) Budget Travels, booked Hotel Kedekut for a 2 day health event for their staff. All the itinerary and the food to be served were confirmed already. The chef of Hotel Kedekut, who knows the manager of Budget Travels, Michael, very well has decided to make pastries and cupcakes for the health event on his own. The event was a success and Michael, being very delighted, promised to pay for the pastries and cupcakes to the chef on behalf of Budget Travels but in the end he didn’t do so. Is Budget Travels under an obligation to do so?

(Total :20 marks)

Write psuedocode and Java code using JOptionPane

Scenario: ABC Resort and Hotel has approached you to write a program to keep track of the number of rooms needed for an event. Customers can request any one of the following types of rooms to be reserved. Because the hotel has limited rooms available for a given event, it can only reserve up to 39 rooms. However, the hotel does not know how many rooms, in total, will be reserved because the rooms are reserved on demand.

Room Type and Price/per night: Single $79.95, Single Deluxe $99.95, Double $149.95, Double Deluxe $179.95

Create a program for use by the hotel staff to take reservation orders for rooms for an event. All events are single night stay events. So you do not need to worry about the number of nights they are staying. An order occurs when the user enters a room type by name (e.g. Single). Until the user has indicated they are finished entering room types, continue to prompt the user to enter a room type. You must validate the room type, providing an error message and re-prompting the user if an invalid room type is entered. Keep track of the number of rooms that will be reserved for each room type. Once the user has indicated they are finished entering room types, display a well-formatted report containing a list of each room type with its associated price, the number of rooms needed for that room type, the total revenue from all rooms for the event, and the average revenue from a room for the event.

Program must use arrays

Park Equipment Leasing purchased a new milling machine for $1.8 million. They depreciate it using MACRS (5-year property). They lease it to Valles Global Industries for $600,000 a year for eight years. Under the Park-O-Matic leasing option, Valles Global owns the machine after the eight years. Park Equipment leasing uses an After-Tax MARR of 12% and pays 38% income tax. Is this a profitable deal for Park Equipment leasing?

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.

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.

??? milions

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