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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
666
Transcribed Image Text: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
Annual operating expenses
Robertson uses straight-line depreciation and the lodge expansion will have a residual value $2,720,000.
8%
1. Annual Operating Income
2. Annual Net Cash Inflow
3. ARR
4. Payback Period
5. NPV
20
$ 2,150,000
$ 1,700,000
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.
Note: Round your answer to 2 decimal places.
4. Calculate the payback period.
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
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