The owners of a discount motel chain are considering building a new motel. Optimistic, pessimistic,...
60.1K
Verified Solution
Link Copied!
Question
Accounting
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%.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
