Your third client at Aeon Insights $($after Mike and Maggie$)$: Suppose a Concordia alumni Michaela Dyer, who has been working as an economist at the World Bank for the past $20$ years, is seriously considering a change in career. She wants to be her own boss and would not mind quitting her job that pays her C$$250,000$ a year for each of the next four years.

She came across a motel up for sale with an asking price of $$800,000.$ The motel has two floors and a total of $36$ rooms. There are $13$ standard rooms on the first floor and $23$ luxury rooms$-$with$-$a$-$view on the second floor. You estimated that the rooms are likely to be rented out $335$ days out of a year. You also estimated that the daily MC of maintaining a rented standard room to be $$20$ but $$30$ for a rented luxury room. For simplicity, MC is constant and therefore MC is the same as AVC. There is no MC or AVC associated with unrented rooms. The annual fixed cost of running the motel is $$240,000$ per year, such as property tax, security systems and insurance. You recommend some one$-$time renovations for the motel before the grand opening and the renovation cost is $$500,000.$ On December $31$st of the fourth year, if Michaela wants to retire, you expect the motel can be sold for $$1,400,000.$ The discount rate, which is the average stock market rate of return, is $7\%.$

Keep all calculations to $4$ decimal places, if applicable.

You also estimated the demand for rooms as below:

QUESTION $1$: For each of the $335$ days, you predict that Michaela can rent out $\_\_\_$ luxury rooms and $\_\_\_$ standard rooms.

a$.23$; $13($tried option, incorrect$)$

b$.20$; $10$

c$.22$; $12$

d$.19$; $9$

e$.21$; $11$

QUESTION $2$: The total discounted profit from renting out the rooms over the four years is equal to $\_\_\_$

a$.$$$2,750,076\mathrm{.}8191$

b$.$ $$2,813,319\mathrm{.}2470$

c$.$ $$1,480,373\mathrm{.}8318$

d$.$ $$1,198,086\mathrm{.}2708$

e$.$ $$2,810,547\mathrm{.}1625$

QUESTION $3$: The NPV for this project is equal to $\_\_\_.$

a$.$ $$1,671,327\mathrm{.}3019$

b$.$ $$457,737\mathrm{.}1272$

c$.$ $$824,524\mathrm{.}4878$

d$.$ $$1,734,569\mathrm{.}7297$

e$.$ $$1,731,797\mathrm{.}6452$

QUESTION $4$: Suppose Michaela is not too sure about the resale price after four years. After all, no one knows what the market conditions would be in four years. You want to convince her that the resale price of $$1,400,000$ is not necessary in order for this business venture to be desirable. You tell her that as long as the resale value is $\_\_\_\_$ or higher on December $31$st in year $4($before discounting$),$ she should go ahead with this adventure.

a$.$ $$0$

b$.$ $$603,274\mathrm{.}0050$

c$.$ $$790,769\mathrm{.}1587$

d$.$ $$142,865\mathrm{.}9447$

e$.$ $$460,234\mathrm{.}8500$

$1$