Question 5 On the basis of the data provided at question 3, what is your expected NPV if you invest $ 150 mi in this hotel today? Consider your WACC to be 10%. O a. -$1,002,273 O b. $1,002,273 O c. $4,961,520 O d. -$911,158
Question 5 On the basis of the data provided at question 3, what is your expected NPV if you invest $ 150 mi in this hotel today? Consider your WACC to be 10%. O a. -$1,002,273 O b. $1,002,273 O c. $4,961,520 O d. -$911,158
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
Related questions
Question
Please only answer practice question 5.
![Question 5
On the basis of the data provided at question 3, what is your expected NPV if you invest $
150 mi in this hotel today? Consider your WACC to be 10%.
O a. -$ 1,002,273
O b. $1,002,273
O. $4,961,520
O d. -$ 911,158](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad0f4b3d-8a79-4d27-a115-b9d454c78eef%2Fb31af172-d507-44e9-b285-273dec069369%2Fhg1bspvr_processed.png&w=3840&q=75)
Transcribed Image Text:Question 5
On the basis of the data provided at question 3, what is your expected NPV if you invest $
150 mi in this hotel today? Consider your WACC to be 10%.
O a. -$ 1,002,273
O b. $1,002,273
O. $4,961,520
O d. -$ 911,158
![Question
The following situation will be used in questions 3, 4 and 5. A hotel is projected to have $ 55
mi in total revenues during the following year. Total expenses are projected to be $ 40 mi. 3%
of the total revenue is allocated as capital reserves. In the next four years, the annual growth
rates in total revenues and total expenses will be (2%, 3%, 4%, 3%) and (4%, 7%, 4%, 3%)
respectively. In the following years, revenues and total expenses will stabilize at a constant
rate of 2.5%. The market discount rate on such assets is estimated at 9%(after all
adjustments). Going out cap rate is 7,5% (after all adjustments). Cost of sales is usually 3%.
Assume no additional costs (brokerage etc.) at the time of the purchase. Your investment
horizon is 5 years. What is the estimated hotel value today?
O a $ 48,477,484
O b. $ 154,961,520
O. $ 162,515,008
O d. $ 224,901,389](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad0f4b3d-8a79-4d27-a115-b9d454c78eef%2Fb31af172-d507-44e9-b285-273dec069369%2Fu49rj_processed.png&w=3840&q=75)
Transcribed Image Text:Question
The following situation will be used in questions 3, 4 and 5. A hotel is projected to have $ 55
mi in total revenues during the following year. Total expenses are projected to be $ 40 mi. 3%
of the total revenue is allocated as capital reserves. In the next four years, the annual growth
rates in total revenues and total expenses will be (2%, 3%, 4%, 3%) and (4%, 7%, 4%, 3%)
respectively. In the following years, revenues and total expenses will stabilize at a constant
rate of 2.5%. The market discount rate on such assets is estimated at 9%(after all
adjustments). Going out cap rate is 7,5% (after all adjustments). Cost of sales is usually 3%.
Assume no additional costs (brokerage etc.) at the time of the purchase. Your investment
horizon is 5 years. What is the estimated hotel value today?
O a $ 48,477,484
O b. $ 154,961,520
O. $ 162,515,008
O d. $ 224,901,389
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