Welcome Inn Hotels is considering the construction of a new hotel for $90 million. The expected life of the hotel is 30 years, with no residual value. The hotel is expected to earn revenues of $26 million per year. Total expenses, including depreciation, are expected to be $15 million per year. Welcome Inn management has set a minimum acceptable rate of return of 14%. Determine the equal annual net cash flows from operating the hotel.  Calculate the net present value of the new hotel, using the present value of an annuity of $1 table found in Appendix A. (Round to the nearest million dollars.)  Does your analysis support construction of the new hotel? Explain.

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.