Answer:
a. Annual Net cash flows:
= Revenue - Expenses + Depreciation
= 26,000,000 - 15,000,000 + (90,000,000 / 30 years)
= 11,000,000 + 3,000,000
= $14,000,000
b. Net present value:
= Present value of cashflows - Investment cost
= (Annual cashflow * present value of an annuity, 14%, 30 periods) - Investment cost
= (14,000,000 * 7.003) - 90,000,000
= $8,042,000
c. Company should construct the hotel as it would bring a positive Net Present Value
Note: In "b" the cashflow was treated as an annuity because it is constant.
