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The recently opened Grand Hyatt Wailea Resort and Spa on Maui cost $600 million

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The recently opened Grand Hyatt Wailea Resort and Spa on Maui cost $600 million, about $800,000 per room, to build. Daily operating expenses average $135 a room if occupied and $80 a room if unoccupied (much of the labor cost of running a hotel is fixed). At an average room rate of $500 a night, a marginal tax rate of 40 percent, and a cost of capital of 11 percent, what year-round occupancy rate do the Japanese investors who financed the Grand Hyatt Wailea require to break even in economic terms on their investment over its estimated 40-year life? What is the likelihood that this investment will have a positive NPV? Assume that the $450 million expense of building the hotel can be written off straight line over a 30-year period (the other $150 million is for the land which is not depreciable) and that the present value of the hotel’s terminal value will be $200 million.

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[Solved] The recently opened Grand Hyatt Wailea Resort and Spa on Maui cost $600 million

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  • Submitted On 04 Jan, 2015 11:33:46
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SLN method for 40 Yr life = 600M/40 = $1,500,000
Economic Profit = Total Income - Total Expenses - Opportunity Lost Cost
At Break Eve...

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The recently opened Grand Hyatt Wailea Resort and Spa on Maui cost $600 million

SLN method for 40 Yr life = 600M/40 = $1,500,000
Economic Profit = Total Income - Total Expenses - Opportunity Lost Cost
At Break Even, Eco profit = 0
So Total Income - Total Expenses - Opportunity Cost = 0<...

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