The owners of a discount motel chain are considering building a new motel. Optimistic, pessimistic,...
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The owners of a discount motel chain are considering building a new motel. Optimistic, pessimistic, and most likely estimates of several key parameters have been obtained from the local builders and the chamber of commerce. These estimates are shown in the table below. The life of the motel is estimated to be 15 years, and MARR is 20%.
| Parameter | Pessimistic | Most Likely | Optimistic |
| Initial Cost | $10,300,000 | $9,075,000 | $6,900,000 |
| Annual Operating | $390,000 | $130,000 | $130,000 |
| Annual Revenue | $1,300,000 | $1,500,000 | $3,700,000 |
a. Based only on the pessimistic estimates, is the new motel economically attractive?
Please enter the PW used to reach your decision: $
b. Based only on the most likely estimates, is the new motel economically attractive?
Please enter the PW used to reach your decision: $
c. Based only on the optimistic estimates, is the new motel economically attractive?
Please enter the PW used to reach your decision: $
d. Based on a beta approximation of expected value estimates, is the new motel economically attractive?
Please enter the PW used to reach your decision: $
Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is 3%.
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