Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create 24 additional rooms for rent. The following estimates are available: $ 3,110,000 Cost of expansion Discount rate Useful life Annual rental income $ 2,150,000 Annual operating expenses $ 1,700,000 Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,720,000. Note: Round your answer to 2 decimal places. 4. Calculate the payback period. Required: 1. Calculate the annual net operating income from the expansion. 2. Calculate the annual net cash inflow from the expansion. 3. Calculate the ARR. 8% 1. Annual Operating Income 2. Annual Net Cash Inflow 3. ARR 4. Payback Period 5 NPV 20 Note: Round your answer to 1 decimal place. 5. Calculate the NPV. (Future Value of $1,Present Value of $1., Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your final answer to nearest whole dollar amount. % years

Robertson Resorts is considering whether to expand its Pagosa Springs Lodge. The expansion will create 24 additional rooms for rent. The following estimates are available: $ 3,110,000 Cost of expansion Discount rate Useful life Annual rental income $ 2,150,000 Annual operating expenses $ 1,700,000 Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,720,000. Note: Round your answer to 2 decimal places. 4. Calculate the payback period. Required: 1. Calculate the annual net operating income from the expansion. 2. Calculate the annual net cash inflow from the expansion. 3. Calculate the ARR. 8% 1. Annual Operating Income 2. Annual Net Cash Inflow 3. ARR 4. Payback Period 5 NPV 20 Note: Round your answer to 1 decimal place. 5. Calculate the NPV. (Future Value of $1,Present Value of $1., Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your final answer to nearest whole dollar amount. % years

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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