You purchased land 3 years ago for $50,000 and believe its market value is now $60,000....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You purchased land 3 years ago for $50,000 and believe its market value is now $60,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $75,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $140,000 each year, while expenses will be a mere $30,000 each year. The initial working capital requirement will be $7,000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 11%. What is the net present value of this project? OA. $63,993 B. $59,226 OC. $30,495 OD. $10,729 You purchased land 3 years ago for $50,000 and believe its market value is now $60,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $75,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $140,000 each year, while expenses will be a mere $30,000 each year. The initial working capital requirement will be $7,000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 11%. What is the net present value of this project? OA. $63,993 B. $59,226 OC. $30,495 OD. $10,729
Expert Answer:
Answer rating: 100% (QA)
To calculate the net present value NPV we need to determine the present value of cash inflows and ou... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Given a CPU with the following specs: Uses 10 V Requires 49 W Has a clock rate of 13 Hz What is the capacitance? Round your answer to 2 decimal places
-
Dana's Ribbon World makes award rosettes. Following is information about the company: Variable cost per rosette Sales price per rosette Total fixed costs per month Required: $ 2.00 5.00 1500.00 1....
-
On January 1, 2021, Entity A Company acquired all the assets and assumed all the liabilities of Entity B Company and merged Entity B into Entity A. In exchange for the net assets of Entity B, Entity...
-
Explain why the coffee shop manager should measure elasticity using the mid-point method in his calculations.
-
Moody Corporation uses a job-order costing system with a plant wide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:...
-
The chapter states, "Firms will supply all those goods that provide consumers with a marginal benefit at least as great as the marginal cost of producing them." A student objects to this statement,...
-
What does an increase in the balance of accounts receivable indicate?
-
The monthly and hourly wage schedule for the employees of Quincy, Inc., follows. No employees are due overtime pay. Compute the following for the last monthly pay of the year: a. The total wages of...
-
18 (1 point) When examining the financial records, you notice that the Capital account has been credited. What is the likely reason for this? Question 18 options: services were provided to a charge...
-
An investor, wants to know how two portfolios are performing in the market: 7% Y (3%) 12% Probability Market portfolio 0.40 0.20 15% 0.40 Beta factor 10% 18% Portfolio X 1.30 10% 8% 4% 0.75 1 The...
-
Suppose that instead of a 7.5% return each year, we project a 11% return in years 1 and 2, a 7% return in years 3 and a 13% return in years 5,6, and 7. What is your estimate of the value of the IRA...
-
Write a few constraints of accessibility SAP.
-
Compare both the models qualitatively.
-
Write CRC cards for accessibility SAP.
-
Write four challenges of using accessibility SAP.
-
Compare traditional accessibility model with accessibility SAP. Which one do you like more?
-
(a) (b) (c) Write the MatLab code to calculate and plot the function y = sinx/x, with due attention to undefined points, and making necessary changes to the output vector to cater for these undefined...
-
g(x) = x 5 5x 6 a. Show that g(x) = 0 has a root, , between x = 1 and x = 2. b. Show that the equation g(x) = 0 can be written as x = (px + q) 1/r , where p, q and r are integers to be found. The...
-
Shreky Enterprises is a private Canadian company located in Ottawa, Ontario. It was incorporated nine years ago to manufacture and distribute products to be sold to hardware stores in Canada. All its...
-
In December 2012, Kandlin made an offer to the shareholders of Delvco to acquire a controlling interest in the company. Kandlin was prepared to pay $1.50 cash per share, provided that 70% of the...
-
ABC Co. has a foreign operation, XYZ Co., located in Australia. XYZ Co. sells goods to the local market and in the past had financed its own operations through operating income and local borrowing....
-
Which one of the following sets the standards for behavior within the organization? A. The mission. B. The values. C. The philosophy. D. The vision.
-
When reviewing an organizational chart, what represents the formal line of authority and responsibility within the organization? A. Specialization of labor. B. Chain of command. C. Span of control....
-
Which type of structure has decision making and power being led by a few people? A. Flat. B. Integrated. C. Matrix. D. Tall.
Study smarter with the SolutionInn App