Value lodges owns an economy motel chain

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Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,040,000; Value Lodges estimates furnishing for the motel will cost an additional $720,000 and will require replacement every 5 years. Annual operating and maintenance costs for the motel are estimated to be $880,000. The average rental rate for a unit is anticipated to be $40/day. Value Lodges expects the motel to have a life of 15 years and a salvage value of $840,000 at the end of 15 years. This estimated salvage value assumes that the furnishings are not new. Furnishings have no salvage value at the end of each 5-year replacement interval. Assume average daily occupancy %ages of 50 %, 60 %, 70 %, and 80 % for years 1 through 4, respectively, and 90 % for the 5th through 15th years, MARR of 12.00 %/year, 365 operating days/year, and ignore the cost of land.

a) Calculate PW?

Reference no: EM131052254

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Value lodges owns an economy motel chain : Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,040,000; Value Lodges estimates furnishing for the motel will cost an additional $720,000 and will require repla..

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