Using after tax ror analysis-good investment

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Reference no: EM131354045

Your real-estate company is considering buying a $5 million dollar hotel. The hotel is expected to earn $20 million dollars (in today’s dollars) every year and have expenses of $17 million dollars (in today’s dollars) which should decrease 5% per year. The company will borrow the money at 10% interest rate compounded monthly for 30 years. Both the interests and the depreciation (according to MACRS) need to be accounted for when computing the taxable income. Inflation is expected to be 3% and the company’s MARR is 18%. Using an after tax ROR analysis, is this a good investment for the company? Use Excel to solve this problem. (Note: today’s dollars is another way of saying constant dollars with today as a base year.) Tax rate is 34% of the taxable income.

Reference no: EM131354045

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