Robertson Resorts is considering whether to expand their Pagosa Springs Lodge. The expansion will create 24 additional rooms for rent. The following estimates are available: Cost of expansion $3,380,000
Discount rate 8%
Useful life 20
Annual rental income $1,700,000
Annual operating expenses $1,250,000
Robertson uses straight-line depreciation and the lodge expansion will have a residual value of $2,360,000,
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. (Round your answer to 2 decimal places.)
4. Calculate the payback period. (Round your answer to 1 decimal place.)
5. Calculate the NPV. (Euture Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations, Round your final answer to nearest whole dollar amount.) $ 450.000 1
Annual Operating Income 2
Annual Net Cash Inflow 3
ARR 4
Payback
NPV