You have been requested to consult Hilton and participate in the meeting in order to make a decision on which investment is t Property Description and Background Information The Hampton Hotel is located in the Hamptons Road area of Virginia Beach, Vir year. Renewal of the lease will be at the option of Hilton. Therefore, the projections will be based on a five-year leasing p Requirements: 

1) Calculation of corporation cost of capital and various profitability measures. Based on the cost of capital for Hilton and its average asset risks for both proposals, estimate their cost of capital. Then, calculate each proposal’s payback period, annual return on investment, IRR and NPV. Which proposal creates more value? In presenting your results, provide justification as to why you have selected one proposal over the other. This will require a discussion of the pros and cons of the capital evaluation methods presented in the proposal. 

2) Analysis of risk of the different alternatives. Even though it was considered that both proposals are in the same risk category as their other investments, how would you assess each proposal’s risk? Justify your response. If you find necessary to reassess any of the proposal’s risk level, would that change your estimation as to which one creates more value?

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ANSWER 1 Based on the cost of capital for Hilton and its average asset risks for both proposals we e... View the full answer