Reference no: EM132726476

Question - Owners of an economy motel chain are considering building a new 200-unit motel in Los Angeles, CA. The present worth cost of building the motel is $8,000,000; the firm estimates furnishings for the motel will cost an additional $800,000 and will require replacement every 5 years. Annual operating and maintenance costs for the facility are estimated to be $800,000. The average rate for a unit is anticipated to be $60/day. A 15-year planning horizon is used by the firm in evaluating new ventures of this type; a terminal salvage value of 15% of the original building cost is anticipated; furnishings are estimated to have no salvage value at the end of each 5-year replacement interval. Assuming an average daily occupancy percentage of 80%, an interest rate (MARR) of 12%, 365 operating days/year, and ignoring the cost of the land, determine the equivalent present worth of this 15 years of cash flows. Include a cash flow diagram in your written work. (Assume that the furnishings would not be replaced at EOY 15.).