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____ [38]
2 years ago
14

Welcome Inn Hotels is considering the construction of a new hotel for $90 million. The expected life of the hotel is 30 years, w

ith no residual value. The hotel is expected to earn revenues of $26 million per year. Total expenses, including depreciation, are expected to be $15 million per year. Welcome Inn management has set a minimum acceptable rate of return of 14%.
a. Determine the equal annual net cash flows from operating the hotel.
b. Calculate the net present value of the new hotel. Use 7.003 for the present value of an annuity of $1 at 14% for 30 periods.
c. Does your analysis support construction of the new hotel?
Business
1 answer:
steposvetlana [31]2 years ago
3 0

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.

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Anika [276]
The answer is "$6.88".

Sales tax rate = 7.4%
price of shoes = $93
Tax paid for a pair of shoes = 7.4% x $93
=7.4/100 x 93
= 0.074 x 93
= 6.882
= $6.88
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2 years ago
Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of
Elden [556K]

Answer:

$10,140,000

Explanation:

To make consolidated statements company needs to consolidate the financial data of its own and its subsidiary.

Revenue can be consolidated of parent and subsidiary as follow:

First

Add revenue of both companies

Total Sales = Patti Company sales + Shannon Inc. sales

Total Sales = $10,000,000 + $200,000 = $10,200,000

Now deduct the sale made to each other because sales mad within the group is not recorded for consolidation purposes and it is not a sale for a group it is an internal group transfer.

Consolidated Sales = Total sales - Internal Sales

Consolidated Sales = $10,200,000 - $60,000 = $10,140,000

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3 years ago
suppose that due to unfavorable growing conditions, this year’s global coffee crop was unusually small. what can we assume about
nekit [7.7K]

The short-run price elasticity of demand will be inelastic and the short-run price elasticity of supply will be inelastic.

Elasticity of demand measures the relationship that exists between price and quantity demanded.

Elasticity of supply measures how quantity supplied changes when there is a change in the price of a good.

<u><em>Types of elasticity.</em></u>

  1. Elastic demand (supply): This means that demand (supply) is sensitive to price changes
  2. Inelastic demand (supply): this means that demand (supply) does not respond to price changes. The coefficient of elasticity is less than one.
  3. Unit elastic demand (supply): demand (supply) changes in equal proportion. The coefficient of elasticity is equal to one.

<em><u>Factors that affect elasticity </u></em>

  1. The number of substitutes the good has: the more substitutes the good has, the more elastic demand is.  
  2. The length of time: demand (supply) is inelastic in the short run. In the short run, producers (consumers) do not have enough time to find suitable substitutes.  In the long run, producers would have more time to search for suitable substitutes or shift to the production of other goods when compared with the short-run.
  3. Ease of entry or exit into an industry: the more easy it is for firms to enter into an industry, the more elastic supply would be.  

To learn more about elasticity of demand, please check:

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No formal steps are necessary to create a sole proprietorship. True or false?
larisa86 [58]

Answer:

True

Explanation:

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When Stuart sold a computer network to a Fortune 500 company, he often called on the company's purchasing department to see if e
Semmy [17]

Answer: Relationship selling

Explanation:

Stuart in his sales transaction with Fortune 500 company, is carrying out relationship selling, where the seller tries to make sales by creating a friendly relationship with their buyers. Relationship selling helps the buyer to easily relate with the seller, thereby making sales very easy to transact.

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