What is the present worth-internal rate of return

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Owners of a motel chain are considering building a new 200-unit motel in Anaheim, 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%, a MARR of 12%, 365 operating days/year, and ignoring the cost of the land, what is the present worth, internal rate of return, and external rate of return? (Assume the furnishings are not replacement at EOY 15.)

Reference no: EM132699393

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