Project #6428 - finance problem

 

  1. You purchased land 3 years ago for $213,000 and believe its market value is now $245,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $105,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $375,000 each year, while expenses will be a mere $297,840 each year. The initial working capital requirement will be $34,000 which will be recovered in the last year. The tax rate is 33%. Your estimated cost of capital is 12%. What is the net present value of this project?
     
     
     
     
     
    ($207,890)
     

Subject Business
Due By (Pacific Time) 05/19/2013 07:40 pm
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