Case 10:Phuket Beach Hotel
VALUING MUTUALLY EXCLUSIVE CAPITAL PROJECTS

Case Overview
Planet Karaoke Pub
Project Lives Monthly rental
(5% increment for 3rd and 4th year)

4 years 170, 000 (THB) 770, 000 to 1, 000, 000 (THB) 55, 000 (THB)

Up front renovation cost
(Depreciated over the life of project - straight line method with zero salvage value)

Overhead expenses

Repair and maintenance cost

10, 000 (THB) / year

Case Overview
Beach Karaoke Pub
Project Lives Up front investment
(Equaled depreciation)

6 years 800, 000 to 1,200 000 (THB) 900, 000 (THB) 4, 672, 000 (THB)

Other investment (Equipment and chairs)
(Depreciated over the life of project - straight line method with zero salvage value)

Estimated …show more content…
Initial Investment
Alternative 2: Beach Karaoke Pub
Beach Karaoke Pub Net Income after Tax Lower Limit 509,147.85

Initial Investment ROI

1,700,000.00 0.299498735 29.95%

Method 4: NPV
Alternative 2: Beach Karaoke Pub
Year Cash Outflow Capital Investment Other Investment Total Initial Investment Cash Inflow Sales 25% Risk Factor F&B (25%) Other Operating (22%) Depreciation Net Income before Tax Tax (30%) Net Income after Tax Depreciation Annual Cash Flow PV Factor Discounted NPV 3,310,076.84 1,610,076.84 (800,000.00) (900,000.00) (1,700,000.00) 4,672,000.00 4,905,600.00 5,150,880.00 5,408,424.00 5,678,845.20 5,962,787.46 0 1 2 3 4 5 6

(1,650,000.00) (1,683,000.00) (1,767,125.00) (1,855,500.00) (1,892,500.00) (1,930,375.00) (1,168,000.00) (1,226,400.00) (1,287,720.00) (1,352,106.00) (1,419,711.30) (1,490,696.87) (1,027,840.00) (1,079,232.00) (1,133,193.60) (1,189,853.28) (1,249,345.94) (1,311,813.24) (283,333.33) 542,826.67 (162,848.00) 379,978.67 283,333.33 663,312.00 0.90 598,970.74 (283,333.33) 633,634.67 (190,090.40) 443,544.27 283,333.33 726,877.60 0.82 592,405.24 (283,333.33) 679,508.07 (203,852.42) 475,655.65 283,333.33 758,988.98 0.74 558,615.89 (283,333.33) 727,631.39 (218,289.42) 509,341.97 283,333.33 792,675.30 0.67 527,129.08 (283,333.33) 833,954.62 (250,186.39) 583,768.24 283,333.33 867,101.57 0.60 520,260.94 (283,333.33) 946,569.02 (283,970.71) 662,598.31 283,333.33 945,931.65 0.54 512,694.95

Method 5: IRR
IRR = Initial Investment/Average