Question

Here is the ORIGINAL data of the Sporthotel problem 1. Projected outflows First year (Purchase Right, Land, and Permits) Second Year (Construct building shell Third Year: (Finish interior and furnishings) TOTAL $1,000,000 $2,000,000 $5,000,000 2. Projected inflows If the franchise is granted hotelwill be worth: If the franchise is denied hotelwill be worth $8,000,000 when it opened $2,000,000 when it opened. The probability of the city being awarded the franchise is 50% ssume that over thin s the same as n that prot om except for two things he probability that the City will be awarded the franchise is not 50% but is do r graded to e when 40%, and the third year projected outflow finish interior and furnishings) is not S2 million but $1 million Given these o changes, which óf the following ist the franchise is granted? O a The project's NPV- $0.00 million O b. The project's NPV $1.00 million c. The project's NPV SO.50 million Od. The project's NPV $0.75 million e. The project's NPV-$0 25 million

Answer 1

Answer is a. Working is below

Particulars	Year			NPV
	1	2	3
Purchase Right, land and permits	-1000000			-1000000
Construct building shell		-2000000		-2000000
Finish interior			-1000000	-1000000
Hotel worth			4000000	4000000
	-1000000	-2000000	3000000	0