Luxmark hotels is considering the construction of a new

Reference no: EM13608449

Luxmark Hotels is considering the construction of a new hotel for $210 million. The expected life of the hotel is 30 years with no residual value. The hotel is expected to earn revenues of $58 million per year. Total expenses, including depreciation, are expected to be $32 million per year. Luxmark management has set a minimum acceptable rate of return of 14%. Assume straight-line depreciation.

a. Determine the equal annual net cash flows from operating the hotel. Round to the nearest million dollars.

b. Calculate the net present value of the new hotel. Use 7.00266 for the present value of an annuity of $1 at 14% for 30 periods. Round to the nearest million dollars

Reference no: EM13608449

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