Re: Bunchester Hotels: Investment Appraisal - Economics Assignment Help

Assignment Task:

Task:

Assessment scenario
All students receive unique numerical data, shown in red.
You have just joined Lepro Limited as a Finance Assistant. Lepro are a successful UK hotel business. You have received the following email from your line manager:

Re: Bunchester Hotels: Investment Appraisal
I have just returned from a meeting with the Finance Director and we’d like you to prepare some preliminary calculations for the planned hotel expansion in Bunchester, to form part of our capital investments plan for the next five years. Following the 2020 global pandemic, we are forecasting that demand for UK holidays will increase over the next few years, as we predict ongoing travel restrictions will mean more UK citizens are forced to holiday in the UK. Bunchester, a seaside resort in the north-west of England is forecast to see significant growth in holidaymakers, as the Bunchester Tourist Board are investing heavily in promoting the town as a holiday destination.

We do not currently have any hotels in Bunchester. We have identified two potential options (Hotel A and B). The Finance Director has given me a summary of the likely cashflows from each hotel, and both investments are for a minimum of five years.
Hotel A
Initial Outlay £6100000
Rooms available 52
Price per room £150
Nights occupied 237
Annual maintenance £100180 increasing by 5.8% each year
Hotel B
Initial Outlay £4020000
Rooms available 75
Price per room £55
Nights occupied 270
Other information:
Hotel A is on the seafront. The Bunchester Tourist Board have suggested this hotel will attract premium prices, which can be charged for sea views etc. However, the seafront location means there is an annual buildings maintenance cost, as the winters in Bunchester are cold and wet.

Hotel B is nearer the town and nightlife. Although the initial investment is lower than Hotel A, it is a larger hotel. It is expected that prices to stay in this hotel will have to be kept low in order to keep the hotel at capacity.

Please can you complete an Excel workbook showing the calculations requested below. Please make sure that I can easily update your spreadsheet with new figures, so it must use cells linkages and formulas throughout. There is a standard template provided which we use for all investment projects, which is provided on the intranet (Moodle)

Our current cost of capital of is 11%. Ideally, the Finance Director would like the hotels to return the cash invested within three years.
 

Please produce:

•  A table showing the inflows and outflows for each hotel for the next five years.

You can assume the investment will take place by the end of this year, so assume 2021 is year zero for your calculations.

•  Calculate Payback period for each hotel.
•  Calculate the NPV for each hotel.
•  The data on room occupancy and ricing has been provided by the Bunchester Tourist Board – we are particularly concerned that the pricing for Hotel A maybe a little high. Please calculate the minimum price we can charge per room before this hotel shows a negative NPV.
•  Please write around 500 words, summarising your findings, which can be used as part of my report to the finance director. You must discuss both financial and non-financial factors of these investments.

This Economics Assignment has been solved by our Economics Experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.