Calculate the net present value of the new hotel

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Reference no: EM133617048

Problem: Inn Hotels is considering the construction of a new hotel for $72 million. The expected life of the hotel is 7 years with no residual value. The hotel is expected to earn revenues of $22 million per year. Total expenses, including depreciation, are expected to be $15 million per year. Welcome Inn management has set a minimum acceptable rate of return of 13%. Assume straight-line depreciation. Determine the equal annual net cash flows from operating the hotel. Calculate the net present value of the new hotel, using the present value of an annuity of $1 table.

Reference no: EM133617048

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