A developer is planning to construct a new five-star hotel on a prime inner city site. Three


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A developer is planning to construct a new five-star hotel on a prime inner city site. Three 1 answer below » A developer is planning to construct a new five-star hotel on a prime inner city site. Three alternative design and size options are under consideration, with net capital Table 12.8. Capital expenditure for alternative hotel designs View complete question » Design 1 Design 2 Design 3 Capital expenditure, EOY 0 ($M) 2 5 3 Capital expenditure, EOY 1 ($M) 12 15 11 Capital expenditure, EOY 2 ($M) A developer is planning to construct a new five-star hotel on a prime inner city site. Three alternative design and size options are under consideration, with net capital Table 12.8. Capital expenditure for alternative hotel designs Design 1 Design 2 Design 3 Capital expenditure, EOY 0 ($M) 2 5 3 Capital expenditure, EOY 1 ($M) 12 15 11 Capital expenditure, EOY 2 ($M) 4 6 8 outlays in the first three years as shown in Table 12.8, after which the hotel should be self-funding. The developer has $20M in readily available funds, and can borrow further finance of up to $5M at an interest rate of 14%. The three designs have estimated net present values over twenty years of $10M, $17M and $9M. Set up a linear programming model which can be used to assist in project choice. View less » Aug 21 2015 03:39 PM

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