4. [EXCEL problem] Your hotel is considering a significant facilities upgrade to increase occupancy by making the hotel

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4 Excel Problem Your Hotel Is Considering A Significant Facilities Upgrade To Increase Occupancy By Making The Hotel 1 (55.33 KiB) Viewed 80 times

4. [EXCEL problem] Your hotel is considering a significant facilities upgrade to increase occupancy by making the hotel more appealing in the off-season. The project will require an initial fixed investment of $1,000,000; straight-line depreciation to zero over the 4-year life; with zero salvage value. The ADR is expected to hold steady at $260/room-night; variable costs are $80/room-night; incremental fixed costs are $350,000 per year; and you expect that the investment will increase occupancy by 5,000 room-nights/year. Your tax rate = 35% and your discount rate is 14%. In Excel, calculate the project's NPV, and then conduct a sensitivity analysis assuming that the room-nights estimate may be off by +15% or -15%. Base case NPV: High-occupancy NPV: Low-occupancy NPV: