Net Dresent Value Methos-auty Take a Load Off Hotels is considering the construction of a new hotel for $18,200,000. The expected life of the hotel is 7 years with no residual value. The hotel is expected to earn revenues of 515,808,000 per year. Total expenses, Increding straight-line depreciation, are expected to be $13,000,000 per year. Take a load orr's management has set a minimum acceptable rate of return of 15% a. Determine the equal annual net cash flows from operating the hotel. 5,408,000 b. Calculate the net presint value of the new hotel, using the present value factor of an annuity of $1 table below. If required, round to the nearest dollar. If the net present value is negative, enter the amount using a minus sign. Present Value of an Annuity of si at Compound Interest Year 6% 10% 129 15% 20% 1 0.943 1.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.555 2.589 5 4.212 3.791 3.505 3.353 2.991 6 4.917 4.355 1.111 3,785 3.326 7 5.582 4.568 4.564 4.160 3.605 6.210 5.335 4487 3.837 b. Calculate the net present value of the new hotel, using the present value fortar of anamuity of $1 table below. If required, round to the nearest dollar. If the net present value is negative, enter the amount using a minus sign. Present Value of an Annuity of si at Compound Interest Year 10% 12% 15% 20% 6% 1 0.943 0.909 0.893 0.870 0,633 2 1.833 1.736 1.690 1.626 1528 3 2.673 2:48 2.402 2.283 2-106 4 3.465 3.170 3.037 2.855 22589 5 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 2 5.582 4.868 4.160 3.605 6.210 5.335 4.968 4.487 3.837 9 6.102 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Annual net cash flow 5,408,000 Praesent value of annual hotel project can now Les not construction costs 6 4.917 4.355 4.111 3.785 3.326 2 5.582 4.868 4.564 4.160 3.605 6,210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Annual net cash now 5,408,000 Present value of annual hotel project cash flows Less hotel construction costs Net present value of notet project c. Which of the following statements is correct regarding this potential project? a. They should build the hotel because the present value of the hotel's operating cash flows exceeds the construction costs b. They should build the hotel because the present value of the hotel's operating cash flows is less than the construction costs c. They should build the hotel because the present value of the hotel's operating cash flows is equal to the construction costs d. They should not build the hotel because the net present value is negative