In early 2008, you purchased and remodeled a 120 - room hotel to handlethe increased number of conventions coming to town. By mid-2008, itbecame apparent that the recession would kill the demand for conventions.Now, you forecast that you will be able to sell only 10,000 room - nights,which cost $80 per room per night to service. You spent $20.00 million on thehotel in 2008, and your cost of capital is 25%. The current going price to sellthe hotel is $15 million.If the estimated demand is 10,000 room - nights, the break - even price is$per room, per night. (Hint: Remember that the cost of capital is theopportunity cost, or true cost, of making an investment.)

Explanation; To determine the break-even price per room per night for the hotel, we must account for…

Answered: In early 2008, you purchased and…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.6P

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Suppose that you are considering an investment, which would require you to pay $1,000 up front (today), and you would receive a payment of $100 per year, for 5 years, beginning one year from now. One year after your fifth payment, you would then have $800 paid to you as a final payment. Assume that the interest rate is equal to 5%. Round all answers to two decimal places. 6. Calculate the Present Value (PV) of the cost and each of the payments for the investment. Adding up the costs and benefits, does this investment have a positive or negative Net Present Value? Should you make this investment? [5 points] 7. How much would the initial cost ($1,000) need to change for you to be exactly indifferent about this investment? (i.e. you receive the same return for making this investment as you do for not making this investment?) [2 points] 8. How would a decrease in interest rates increase or decrease the present value (PV) of the investment that this question is considering? Explain your…
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If Peregrine consumes(1,500,880)and earns(1,300,1,100)and if the interest rate is10%, the present value of his endowment is

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