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home / study / business / finance / finance questions andanswers / margaritaville hotel properties is opening a new beachresort in tybee island, ga at a cost ... Question: MargaritavilleHotel Properties is opening a new beach resort in Tybee Island, GAat a cost of $2... Margaritaville Hotel Properties is opening a newbeach resort in Tybee Island, GA at a cost of $250 Million in year0. The hotel is expected to operate for 20 years and at the end, besold for approximately $500 Million in year 20. As an investmentthe hotel expected to earn $27 Million per year (including $20Million in year 20). With a discount rate of 8% and reinvestmentrate of 8%, analyze the projects feasibility using: Payback ?Discounted Payback ? NPV ? IRR ? Profitability Index ? MIRR Itturns out, you forgot that the franchise company that licenses theMargaritaville name will require the hotel owners to renovate thehotel property in year 10. This will result in significant roomclosures and a significant capital investment. Therefore, cashflows in that year 10 are expected to be -$5 Million. Using MIRR,what did you get for a rate of return?

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Part aPaybackThe payback period for the project is calculated as belowYearCash FlowCumulative Cash Flow02502501272232271963271694271425271156278872761827349277102720112747122774132710114271281527162717271827192720520As can be seen from the above table that cumulative cash flowsturn from negative to positive between Year 9 and Year 10Therefore the payback period will lie between these 2 years Theformula for calculating payback period is derived as belowPayback Period Years Upto which PartialRecovery is Made Balance AmountCash Flow of the Year in WhichFull Recovery is Made 9 727 926 YearsThe project should be selected based on the paybackperiod of 926 year as it indicates that the initial investment isrecovered within the life of the projectDiscountedPayback PeriodThe value of discounted payback period is arrived as belowYearCash Flow APresent Value Factor 8 BDiscounted Cash Flows ABCumulative Discounted Cash See Answer

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home / study / business / finance / finance questions andanswers / margaritaville hotel properties is opening a new beachresort in tybee island, ga at a cost ... Question: MargaritavilleHotel Properties is opening a new beach resort in Tybee Island, GAat a cost of $2... Margaritaville Hotel Properties is opening a newbeach resort in Tybee Island, GA at a cost of $250 Million in year0. The hotel is expected to operate for 20 years and at the end, besold for approximately $500 Million in year 20. As an investmentthe hotel expected to earn $27 Million per year (including $20Million in year 20). With a discount rate of 8% and reinvestmentrate of 8%, analyze the projects feasibility using: Payback ?Discounted Payback ? NPV ? IRR ? Profitability Index ? MIRR Itturns out, you forgot that the franchise company that licenses theMargaritaville name will require the hotel owners to renovate thehotel property in year 10. This will result in significant roomclosures and a significant capital investment. Therefore, cashflows in that year 10 are expected to be -$5 Million. Using MIRR,what did you get for a rate of return?