8. Consecutive losses of Ocean Park since 2016 and steadily losing visitors expose the park to the risk of forced closure in June if without the rescue money from the government.  Basing on the economic concepts/theories that you have learnt in the course and the information given here, explain why it has to close?

An amusement park wants to assess how much money its patrons intend to spend at the park today (aside from the price of admission). You will use convenience sampling.

1. Explain how you would select the sample.

2. Explain how you would gather the data.

The Royal Hotel is being sold. The underwriter requests the pro forma statements showing future projected cash flows from the hotel owner. If the underwriter only uses this information, (a) which approach to valuation are they using? Please also (b) name and (c) briefly describe the other two approaches.

What differences if any do you think exist in the way that a professional hotelier would manager an American owned hotel in the United States or a European or Asian owned hotel in the United States?

What are differences in the way governments in other countries affect the management and operation of hotels in those countries?

A hotel runs several advertisements in the student newspaper of a local university, promoting its Sunday brunch menu. The ads increase the number of people visiting its restaurant, but only slightly.  Is the campaign necessarily a failure? What other goals might the hotel have for this advertising campaign? (Answer thoroughly.)

During the 1940s, military ships from the South Pacific accidentally introduced brown tree snakes from Australia to the island of Guam. These snakes eat birds, lizards, and small mammals in their native range of Australia. Since no species on Guam eats the snakes, their population has grown rapidly. Researchers estimate that two million tree snakes now inhabit the island. So far, 10 species of birds and 5 species of lizards have disappeared from Guam; small mammals have also decreased in abundance.

Use this information and your knowledge about biology to answer questions 1 – 5

1. Since the brown tree snake is a keystone species in Guam, it must also be a keystone species in Australia. True or false?

2. Native predators of birds on Guam likely decreased in abundance after brown tree snakes arrived. True or false?

3. If birds on Guam usually disperse seeds, brown tree snakes likely had a negative indirect effect on plants. True or false?  

4. Since more prey and fewer predators occur on Guam than in Australia, the density of brown tree snakes in Guam likely exceeds the density in Australia. True or false?

5. If some species of the now-extinct lizards used to eat bird eggs, brown tree snakes had a positive direct effect and a negative indirect effect on birds. True or false?

This is also the information provided

Here is the information that William has accumulated so far:

The Capital Budgeting Projects

He must choose one of the four capital budgeting projects listed below:  

Table 1

Table 1 shows the expected after-tax operating cash flows for each project. All projects are expected to have a 4 year life. The projects differ in size (the cost of the initial investment), and their cash flow patterns are different. They also differ in risk as indicated in the above table.

The capital budget is $22 million and the projects are mutually exclusive.

Capital Structures

Grand Island Hotel has the following capital structure, which is considered to be optimal:

Cost of Capital

William knows that in order to evaluate the projects he will have to determine the cost of capital for each of them. He has been given the following data, which he believes will be relevant to his task.

(1)The firm’s tax rate is 38%.

(2) Grand Island Hotel has issued a 9% semi-annual coupon bond with 15 years term to maturity. The current trading price is $960.

(3) The firm has issued some preferred stock which pays an annual 8.5% dividend of $100 par value, and the current market price is $98.

(4) The firm’s stock is currently selling for $88 per share. Its last dividend (D₀) was $4.5, and dividends are expected to grow at a constant rate of 7.5%. The current risk free return offered by Treasury security is 2.5%, and the market portfolio’s return is 8%. Grand Island Hotel has a beta of 2.1. For the bond-yield-plus-risk-premium approach, the firm uses a risk premium of 3.9%.

(5) The firm adjusts its project WACC for risk by adding 1.8% to the overall WACC for high-risk projects and subtracting 2% for low-risk projects.

William knows that Grand Island Hotel executives have favored IRR in the past for making their capital budgeting decisions. His professor at Seattle U. said NPV was better than IRR. His textbook says that MIRR is also better than IRR. He is the new kid on the block and must be prepared to defend his recommendations.

First, however, William must finish the analysis and write his report. To help begin, he has formulated the following questions:

1. What is the firm’s cost of debt?

2. What is the cost of preferred stock for Grand Island Hotel?

3. Cost of common equity

(1) What is the estimated cost of common equity using the CAPM approach?

(2) What is the estimated cost of common equity using the DCF approach?

(3) What is the estimated cost of common equity using the bond-yield-plus-risk-premium approach?

(4) What is the final estimate for r_s?

4. What is Grand Island Hotel’s overall WACC?

5. Do you think the firm should use the single overall WACC as the hurdle rate for each of its projects? Explain.

6. What is the WACC for each project? Place your numerical solutions in Table 2.

7. Calculate all relevant capital budgeting measures for each project, and place your numerical solutions in Table 2.

Table 2

In 2014 Vail Resorts, Inc. (MTN), purchased Park City Mountain Resort for $182.5 million. Vail also announced it would invest another $115 million for resort upgrades, which included $50 million to link the Park City Mountain Resort to Vail's neighboring Canyons Resort. This would create one of the largest ski resorts in the United States, with over 7,000 acres of skiable terrain.

Interestingly, the opportunity to purchase Park City Mountain Resort arose because the previous owners missed the deadline to renew their 20-year lease of the property by two days. The unexpected option to purchase the resort led top management to engage in capital budgeting analysis to see if the massive expenditure necessary for the purchase and upgrade of the Park City Mountain Resort would pay off.

Instructions

1. What estimates would be needed for Vail to perform a net present value analysis of whether to buy the Park City Mountain Resort?

2. What uncertainties would Vail have to consider about these estimates?

3. What metrics are available to external stakeholders for use in assessing Vail's capital budgeting decisions?

Note: use proper citations when necessary.

• Which type of leadership do you prefer: Normative or Utilitarian? What does bureaucracy mean to you? Give an example of McDonaldization that has been in your life (besides the movie theater). Do you believe that McDonaldization is good, bad, or both and why?

1. Nineteenth century liberalism included the idea of all of the following except

             a.         property qualifications for voting.

b.         women's suffrage.

c.         a government of limited powers.

d.         protection of basic civil rights.

e.         a constitutional state or government.

2.  The so-called "scramble" for Africa occurred

             a.         between 1815 and 1850.

b.         during the French Revolution.

c.         between the 1880s and 1900.

d.         in the 1500s.

e.         in the 1600s.

3. Woodrow Wilson's peace goals included all of the following except

a.         punishment of Germany for starting the war.

b.         open covenants of peace instead of secret diplomacy.

c.         reduction of national armaments.

d.         self-determination.

e.         a general association of nation to guarantee territorial integrity.

4. The Suez Canal is in what nation?

a.         Panama.

b.         Italy.

c.         Germany.

d.         Egypt.

e.         Great Britain.

5. Economically, colonies were important in

a.         providing markets for manufacturing items produced in the mother

            country.

b.         producing manufactured goods to be sold in the mother country.

c.         providing soldiers for the colonial armies.

d.         purchasing raw materials from the mother country.

e.         investing financial resources in the mother country.