Schematic drawings and cost estimates are characteristics of which phase found in the facility construction process?

Group of answer choices

Programming Phase

Construction Phase

Occupancy Phase

Design Phase

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.

The Sai Kung Inn is a small family-run hotel in the New Territories. As a family-owned business, it relies mainly on traveler recommendations and on visitors to local Sai Kung residents. In particular, it ranks in the top 10% of TripAdvisor’s accommodations in Sai Kung. The Sai Kung Inn has 12 guest rooms, and to keep the operation running efficiently it employs two full-time reception staff, and three morning housekeeping staff.

Winnie is the hotel manager and the daughter of the property owner. She is considering to adopt a balanced scorecard approach for performance evaluation. She has identified a number of potential performance measures:

1. 1) Number of items on hotel restaurant menu

2. 2) Revenue

3. 3) Percentage of reception staff completing hospitality and customer satisfaction course

4. 4) Customer satisfaction with dining options

5. 5) Average percentage occupancy

6. 6) Number of restaurant staff completing cooking training courses

7. 7) Percentage of cleaning staff completing housekeeping and hygiene courses

8. 8) Average TripAdvisor rating

9. 9) Number of guest complaints about room cleanliness

10. 10) Average number of minutes taken to process guests’ check-in

11. 11) Total profits

12. 12) Frequency and quality of room cleaning

Required:

1. (a) Using the 12 performance measures suggested above, draw a balanced scorecard diagram for The Sai Kung Inn with the four main categories of the balanced scorecard, classifying each of the performance measures into one of the four categories. Draw arrows between individual performance measures to show causal links and indicate with a “+” or “–” whether the performance measure should increase or decrease.

2. (b) Winnie believes that The Sai Kung Inn’s occupancy rate is lower than her competitors because The Sai Kung Inn charges slightly higher prices and does not attract guests who prefer cheaper accommodation. Winnie believes that in order to improve the financial performance of The Sai Kung Inn, the company should focus on improving customer satisfaction to justify higher prices, instead of reducing costs to compete on price. She would like to improve the rank on TripAdvisor to be the top-rated accommodation in Sai Kung, by focusing on operational and staff improvements. Help Winnie develop two new performance measures to build into her balanced scorecard. For each performance measure you suggest, identify which category it would fit into, how to measure it, and how it relates to the organization goal.

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