Sean Potter owns and operates a regional chain of motels in the Port Elgin area...
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Sean Potter owns and operates a regional chain of motels in the Port Elgin area and is looking to expand into Sauble Beach He is currently in discussion with two people about buying each of their motels. After reviewing historical financial records, Sean hat come up with the following estimates of cash flows for each of these operations: Slapen Motel Bom Sono Motel 20 Yearly after-tax cash inflow $ 100,000 110.000 140,000 170,000 180,000 Probability % % Yearly after tax cashinfo $ 110,000 120,000 140,000 150,000 15 20 25 20 Probabilite 30 30 30 10 % % % % % % Mr.Potter is looking at a 20-year time horizon and will use this time period for decision-making purposes. Either motel can be acquired for $1,250,000. Mr.Potter uses a risk-adjusted discount rate when considering investments. His scale (presented in the table below) is related to the coefficient of variation. Required: A. Com pute Expected Cash Flow for each motel B. Com pute the Standard Deviation for each motel C. Compute the Coefficient of Variation for each motel D. Compute the risk-adjusted net present value for each motel. E Which investment should Mr. Johnson accept? Note (Do not round intermediate calculations. Round the final answers to nearest whole dollar
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