Reference no: EM132795338

Question - Background Info: The cheapest is a generic tiny house for $20,000 that will require additional work to provide the technology to meet their goals. They estimate about $10,000 additional per house. They also found a supplier in NSW that will provide two different custom versions (Woolamai $71,900 and Yaroomba $89,900) on the website Aussie Tiny Houses. They have not contacted them but expect to be able to negotiate a 20% discount if they can guarantee volume purchases.

They are considering the following model: Each house would be shared with 50% belonging to the company and 50% belonging to an investment.

The revenue for the house when rented out (as a short term rental accommodation) would be split between: 50% to the investors, 20% to the landowner and 30% to the company. The cost of cleaning would be deducted from the pre-distributed revenue.

Under one scenario, each hotel will be sold to an investor/manager that is responsible for all costs of cleaning and maintenance. Each Tiny Hotel will pay 30% of revenue of which 15% goes to the local landowner as rent and 15% is remitted back to Tiny Hotels as a service fee. If cleaning/maintenance fees are 10% of revenue, what will be the profit to an individual Tiny Hotel if the per night rent is $299 and the individual Tiny Hotel has a 75% occupancy rate? How does this change if the Tiny Hotel reaches 95% occupancy?

If a Tiny Hotel is expected to last 5 years and remits $10,000 per year, what is the NPV of selling one Tiny Hotel for $100,000 under the three different cost prices identified (assume a discount rate of 10%)?