Total Area 4,286 square feet

Unused space 3,000 square feet

Lease Option : Planet Club Karaoke

Project life 4 years
Renovation cost (high) 1,000,000 bath
Renovation cost (low) 770,000 bath

Weighted Average Cost of Capital (WACC)

WACC Structure Rates
Equity 75% 12%
Debt 25% 10%
Weighted Average Cost of capital (WACC) 10.75%

Build Option : Beach Pub Karaoke

Project life 6 years
Investment Renovation (High) 1,200,000 bath
Investment Renovation (Low) 800,000 bath
Investment Equipment 900,000 bath
Tax rate 30%
Cost of capital (WACC %) 11%
Sales growth rate 5% of sales
Food and beverage cost 25% of sales
Salary 16% of sales
Shared overhead 55,000 bath
Other operating expense 22% of sales
Increase in repairs and maintenance 10,000 bath
Annual capital expenditure equal depreciation

ANNUITY FACTOR
Planet Beach
Interest Rate 10.75% 10.75%
Periods 4 6
Annuity Factor 3.11907857124187 4.26118131250961

PATRONAGE FACTOR
Patronage Factor Decrease Revenue 25%
0% 0.00%
25% 6.25%
50% 12.50%
75% 18.75%
100% 25.00%
 Tax Rate
9.00%
30% 1.75%
10.75%

Sunk Cost
Sunk Cost

considered as expenses, for act like paying copyright for karaoke songs
 Lease - Planet Club Karaoke
Low Investment - 770,000
Patronage 25% Patronage 50% Patronage 52.18% Patronage 75%
Net Present Value 2,053,688 165,017 0 (1,723,654)
Internal Rate of Return 111.26% 20.78% 10.75% -
Profitability Index 3.6671 1.2143 1.0000 (1.24)
Payback Period 0.85 2.46 2.82 >4
Discounted Payback 0.95 3.01 3.12 >4
Return of Investment (ROI) 4.71 1.54 1.27 (1.62)
Equivalent Annual Annuity 658,428 52,906 - (552,616)

Lease - Planet Club Karaoke Low Inv. High Inv.

Minimum Patronage for NPV = 0 52.18% 49.85%
Minimum Guest reduction 13.05% 12.46%

Build - Beach Club

Low Investment - 800,000
Patronage 25% Patronage 50% Patronage 56.93% Patronage 75%
Net Present Value 3,387,599 735,244 (0) (1,917,111)
Internal Rate of Return 62.58% 23.46% 10.75% -
Profitability Index 2.9927 1.4325 1.0000 (0.13)
Payback Period 1.60 3.28 4.62 >6
Discounted Payback 1.84 4.16 6.04 >6
Return of Investment (ROI) 4.29 2.07 1.46 (0.15)
Equivalent Annual Annuity 794,990 172,545 (0) (449,901)

Build - Beach Club Low Inv. High Inv.

Minimum Patronage for NPV = 0 56.93% 52.09%
Minimum Guest reduction 14.23% 13.02%
Karaoke
High Investment - 1,000,000
Patronage 25% Patronage 49.85% Patronage 50% Patronage 75%
1,877,492 0 (11,179) (1,899,850)
83.95% 10.75% 10.21% -
2.88 1.0000 0.99 -0.8998
1.09 2.90 3.04 >4
1.23 3.22 >4 >4
3.69 1.27 1.26 -1.18
601,938 - (3,584) (609,106)

Club
High Investment - 1,200,000
Patronage 25% Patronage 50% Patronage 52.09% Patronage 75%
2,873,967 221,612 - (2,423,203)
47.92% 14.03% 0 0.00%
2.37 1.11 1.00 0.0000
2.01 4.14 >6 0.00
2.36 5.43 >6 0.00
3.40 1.60 1.45 0.00
674,453 52,007 - (568,669)
 Sensitivity Analysis of Equivalent Annuity base on patronage

Patronage Lease - Min Lease - Max Build - Min Build - Max Option
25% 658,428 601,938 794,990 674,453 Accept All
50% 52,906 (3,584) 172,545 52,007 Reject - Lease Max
75% (552,616) (609,106) (449,901) (568,669) Reject All

Sensitivity Analysis of Equivalent Annuity base on Patronage and Cost of Capital

Build - Maximum Investment (in Bath) Build - Minimum In

Cost of Capital
Patronage 8% 10.75% 12% 14% Patronage
25% 779,329 674,453 631,144 566,873 25%
50% 102,374 52,007 31,237 449 50%
75% (574,582) (570,439) (568,669) (565,975) 75%

Lease - Maximum Investment (in Bath) Lease - Minimum I

Cost of Capital
Patronage 8% 10.75% 12% 14% Patronage
25% 659,181 601,938 577,705 541,048 25%
50% 15,381 (3,584) (11,625) (23,802) 50%
75% (628,420) (609,106) (600,954) (588,652) 75%

Decission for Build or Lease (in Maximum Investment) Decission for Build or Leas
Cost of Capital
Patronage 8% 10.75% 12% 14% Patronage
25% Build Max Build Max Build Max Build Max 25%
50% Build Max Build Max Build Max Build Max 50%
75% Reject Both Reject Both Reject Both Reject Both 75%
 Option

ase Max

on Patronage and Cost of Capital

Build - Minimum Investment (in Bath)

Cost of Capital
8% 10.75% 12% 14%
902,129 794,990 750,744 685,079 Max Equivalent Annuity
225,174 172,545 150,837 118,655
(451,781) (449,901) (449,069) (447,769)

Lease - Minimum Investment (in Bath)

Cost of Capital
8% 10.75% 12% 14%
714,603 658,428 634,647 598,673
70,803 52,906 45,317 33,823
(572,998) (552,616) (544,012) (531,027)

Decission for Build or Lease (in Minimum Investment)

Cost of Capital
8% 10.75% 12% 14%
Build Min Build Min Build Min Build Min
Build Min Build Min Build Min Build Min
Reject Both Reject Both Reject Both Reject Both
Reduction (Patronage at 25%) 6.25%

Year 0 1
Net Investment (770,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 25%) (825,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (192,500)
Reduction from Revenue (825,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 1,012,500
Tax (303,750)
708,750
Add :
Depreciation 192,500
901,250

Cash Flow (770,000) 901,250

PV of 1 Factor 1.0000 0.9029
Present Value (770,000) 813,770

Accumulated Cash Flow (770,000) 131,250

Accumulated PV to CF (770,000) 43,770

Cost of Capital 10.75% 8%

Net Present Value 2,053,688 2,228,904
Internal Rate of Return 111.26%
Profitability Index 3.6671
Payback Period 0.85
Discounted Payback 0.95
Return of Investment (ROI) 4.71
Equivalent Annual Annuity 658,428 714,603
 2 3 4

13,464,000 14,137,000 14,844,000

(841,500) (883,563) (927,750)

2,040,000 2,142,000 2,142,000

(192,500) (192,500) (192,500)

(841,500) (883,563) (927,750)
(10,000) (10,000) (10,000)
996,000 1,055,938 1,011,750
(298,800) (316,781) (303,525)
697,200 739,156 708,225

192,500 192,500 192,500

889,700 931,656 900,725

889,700 931,656 900,725 3,623,331

0.8153 0.7362 0.6647
725,364 685,843 598,711

1,020,950 1,952,606 2,853,331

769,134 1,454,977 2,053,688

12% 14%
1,979,512 1,867,308

634,647 598,673
Reduction (Patronage at 50%) 12.50%

Year 0 1
Net Investment (770,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 50%) (1,650,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (192,500)
Reduction from Revenue (1,650,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 187,500
Tax (56,250)
131,250
Add :
Depreciation 192,500
323,750

Cash Flow (770,000) 323,750

PV of 1 Factor 1.0000 0.9029
Present Value (770,000) 292,325

Accumulated Cash Flow (770,000) (446,250)

Accumulated PV to CF (770,000) (477,675)

Cost of Capital 10.75% 8%

Net Present Value 165,017 220,839
Internal Rate of Return 20.78%
Profitability Index 1.2143
Payback Period 2.46
Discounted Payback 3.01
Return of Investment (ROI) 1.54
Equivalent Annual Annuity 52,906 70,803
 2 3 4

13,464,000 14,137,000 14,844,000

(1,683,000) (1,767,125) (1,855,500)

2,040,000 2,142,000 2,142,000

(192,500) (192,500) (192,500)

(1,683,000) (1,767,125) (1,855,500)
(10,000) (10,000) (10,000)
154,500 172,375 84,000
(46,350) (51,713) (25,200)
108,150 120,663 58,800

192,500 192,500 192,500

300,650 313,163 251,300

300,650 313,163 251,300 1,188,863

0.8153 0.7362 0.6647
245,117 230,536 167,039

(145,600) 167,563 418,863

(232,558) (2,022) 165,017

12% 14%
141,347 105,497

45,317 33,823
Minimum Patronage at Lowest Investment for NPV = 0 13.05%

Year 0 1
Net Investment (770,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 13.05%) (1,722,082)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (192,500)
Reduction from Revenue (1,722,082)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 115,418
Tax (34,625)
80,793
Add :
Depreciation 192,500
273,293

Cash Flow (770,000) 273,293

PV of 1 Factor 1.0000 0.9029
Present Value (770,000) 246,765

Accumulated Cash Flow (770,000) (496,707)

Accumulated PV to CF (770,000) (523,235)

Net Present Value -

Internal Rate of Return 10.75%
Profitability Index 1.0000
Payback Period 2.82
Discounted Payback 3.12
Return of Investment (ROI) 1.27
Equivalent Annual Annuity -
 2 3 4

13,464,000 14,137,000 14,844,000

(1,756,524) (1,844,324) (1,936,559)

2,040,000 2,142,000 2,142,000

(192,500) (192,500) (192,500)

(1,756,524) (1,844,324) (1,936,559)
(10,000) (10,000) (10,000)
80,976 95,176 2,941
(24,293) (28,553) (882)
56,684 66,623 2,058

192,500 192,500 192,500

249,184 259,123 194,558

249,184 259,123 194,558 976,158

0.8153 0.7362 0.6647
203,157 190,755 129,323

(247,524) 11,600 206,158

(320,078) (129,323) -
Reduction (Patronage at 75%) 18.75%

Year 0 1
Net Investment (770,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 75%) (2,475,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (192,500)
Reduction from Revenue (2,475,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT (637,500)
Tax 191,250
(446,250)
Add :
Depreciation 192,500
(253,750)

Cash Flow (770,000) (253,750)

PV of 1 Factor 1.0000 0.9029
Present Value (770,000) (229,120)

Accumulated Cash Flow (1,023,750)

Accumulated PV to CF (999,120)

Cost of Capital 10.75% 8%

Net Present Value (1,723,654) (1,787,226)
Internal Rate of Return
Profitability Index -1.2385
Payback Period >4
Discounted Payback >4
Return of Investment (ROI) -1.62
Equivalent Annual Annuity (552,616) (572,998)
 2 3 4

13,464,000 14,137,000 14,844,000

(2,524,500) (2,650,688) (2,783,250)

2,040,000 2,142,000 2,142,000

(192,500) (192,500) (192,500)

(2,524,500) (2,650,688) (2,783,250)
(10,000) (10,000) (10,000)
(687,000) (711,188) (843,750)
206,100 213,356 253,125
(480,900) (497,831) (590,625)

192,500 192,500 192,500

(288,400) (305,331) (398,125)

(288,400) (305,331) (398,125) (1,245,606)

0.8153 0.7362 0.6647
(235,130) (224,771) (264,633)

(1,312,150) (1,617,481) (2,015,606)

(1,234,249) (1,459,020) (1,723,654)

12% 14%
(1,696,818) (1,656,314)

(544,012) (531,027)
Reduction (Patronage at 25%) 6.25%

Year 0 1
Net Investment (1,000,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 25%) (825,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (250,000)
Reduction from Revenue (825,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 955,000
Tax (286,500)
668,500
Add :
Depreciation 250,000
918,500

Cash Flow (1,000,000) 918,500

PV of 1 Factor 1.0000 0.9029
Present Value (1,000,000) 829,345

Accumulated Cash Flow (81,500)

Accumulated PV to CF (170,655)

Cost of Capital 10.75% 8%

Net Present Value 1,877,492 2,056,038
Internal Rate of Return 83.95%
Profitability Index 2.8775
Payback Period 1.09
Discounted Payback 1.23
Return of Investment (ROI) 3.69
Equivalent Annual Annuity 601,938 659,181
 2 3 4

13,464,000 14,137,000 14,844,000

(841,500) (883,563) (927,750)

2,040,000 2,142,000 2,142,000

(250,000) (250,000) (250,000)

(841,500) (883,563) (927,750)
(10,000) (10,000) (10,000)
938,500 998,438 954,250
(281,550) (299,531) (286,275)
656,950 698,906 667,975

250,000 250,000 250,000

906,950 948,906 917,975

906,950 948,906 917,975 3,692,331

0.8153 0.7362 0.6647
739,428 698,541 610,177

825,450 1,774,356 2,692,331

568,773 1,267,315 1,877,492

12% 14%
1,801,907 1,687,570

577,705 541,048
Minimum Patronage at Highest Investment for NPV = 0 12.46%

Year 0 1
Net Investment (1,000,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 12.46%) (1,645,117)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (250,000)
Reduction from Revenue (1,645,117)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 134,883
Tax (40,465)
94,418
Add :
Depreciation 250,000
344,418

Cash Flow (1,000,000) 344,418

PV of 1 Factor 1.0000 0.9029
Present Value (1,000,000) 310,987

Accumulated Cash Flow (1,000,000) (655,582)

Accumulated PV to CF (1,000,000) (689,013)

Net Present Value -

Internal Rate of Return 10.75%
Profitability Index 1.0000
Payback Period 2.90
Discounted Payback 3.22
Return of Investment (ROI) 1.27
Equivalent Annual Annuity -
 2 3 4

13,464,000 14,137,000 14,844,000

(1,678,019) (1,761,895) (1,850,009)

2,040,000 2,142,000 2,142,000

(250,000) (250,000) (250,000)

(1,678,019) (1,761,895) (1,850,009)
(10,000) (10,000) (10,000)
101,981 120,105 31,991
(30,594) (36,031) (9,597)
71,387 84,073 22,394

250,000 250,000 250,000

321,387 334,073 272,394

321,387 334,073 272,394 1,272,272

0.8153 0.7362 0.6647
262,023 245,929 181,060

(334,195) (122) 272,272

(426,989) (181,060) -
Reduction (Patronage at 50%) 12.50%

Year 0 1
Net Investment (1,000,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 50%) (1,650,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (250,000)
Reduction from Revenue (1,650,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 130,000
Tax (39,000)
91,000
Add :
Depreciation 250,000
341,000

Cash Flow (1,000,000) 341,000

PV of 1 Factor 1.0000 0.9029
Present Value (1,000,000) 307,901

Accumulated Cash Flow (659,000)

Accumulated PV to CF (692,099)

Cost of Capital 10.75% 8%

Net Present Value (11,179) 47,973
Internal Rate of Return 10.21%
Profitability Index 0.9888
Payback Period 3.04
Discounted Payback >4
Return of Investment (ROI) 1.26
Equivalent Annual Annuity (3,584) 15,381
 2 3 4

13,464,000 14,137,000 14,844,000

(1,683,000) (1,767,125) (1,855,500)

2,040,000 2,142,000 2,142,000

(250,000) (250,000) (250,000)

(1,683,000) (1,767,125) (1,855,500)
(10,000) (10,000) (10,000)
97,000 114,875 26,500
(29,100) (34,463) (7,950)
67,900 80,413 18,550

250,000 250,000 250,000

317,900 330,413 268,550

317,900 330,413 268,550 1,257,863

0.8153 0.7362 0.6647
259,181 243,235 178,505

(341,100) (10,688) 257,863

(432,918) (189,684) (11,179)

12% 14%
(36,258) (74,241)

(11,625) (23,802)
Reduction (Patronage at 75%) 18.75%

Year 0 1
Net Investment (1,000,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 75%) (2,475,000)

Operating Cash Flow

Rental Income 2,040,000
Less :
Depreciation (250,000)
Reduction from Revenue (2,475,000)
Increase Expenses for Repair and Maintenance (10,000)
EBIT (695,000)
Tax 208,500
(486,500)
Add :
Depreciation 250,000
(236,500)

Cash Flow (1,000,000) (236,500)

PV of 1 Factor 1.0000 0.9029
Present Value (1,000,000) (213,544)

Accumulated Cash Flow (1,236,500)

Accumulated PV to CF (1,213,544)

Cost of Capital 10.75% 8%

Net Present Value (1,899,850) (1,960,092)
Internal Rate of Return
Profitability Index -0.8998
Payback Period >4
Discounted Payback >4
Return of Investment (ROI) -1.18
Equivalent Annual Annuity (609,106) (628,420)
 2 3 4

13,464,000 14,137,000 14,844,000

(2,524,500) (2,650,688) (2,783,250)

2,040,000 2,142,000 2,142,000

(250,000) (250,000) (250,000)

(2,524,500) (2,650,688) (2,783,250)
(10,000) (10,000) (10,000)
(744,500) (768,688) (901,250)
223,350 230,606 270,375
(521,150) (538,081) (630,875)

250,000 250,000 250,000

(271,150) (288,081) (380,875)

(271,150) (288,081) (380,875) (1,176,606)

0.8153 0.7362 0.6647
(221,066) (212,072) (253,167)

(1,507,650) (1,795,731) (2,176,606)

(1,434,610) (1,646,682) (1,899,850)

12% 14%
(1,874,423) (1,836,052)

(600,954) (588,652)
Cost of capital (WACC) 10.75%
Reduction (Patronage at 25%) 6.25%

Year 0 1 2
Net Investment
Renovation (800,000)
Equipment (900,000)
(1,700,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 25%) (825,000) (841,500)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (283,333) (283,333)
Capital Expenditure (283,333) (283,333)
1,909,493 2,033,301
Reduction from Revenue (825,000) (841,500)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT 1,074,493 1,181,801
Tax (322,348) (354,540)
Net Income 752,145 827,261
Add :
Depreciation 283,333 283,333
Free Cash Flow 1,035,479 1,110,594

Cash Flow (1,700,000) 1,035,479 1,110,594

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (1,700,000) 934,969 905,457

Accumulated Cash Flow (1,700,000) (664,521) 446,073

Accumulated PV to CF (1,700,000) (765,031) 140,427

Cost of Capital 8% 10.75% 12%

Net Present Value 3,844,137 3,387,599 3,199,054
Internal Rate of Return 62.58%
Profitability Index 2.9927
Payback Period 1.60
Discounted Payback 1.84
Return of Investment (ROI) 4.29
Equivalent Annual Annuity 902,129 794,990 750,744
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(883,563) (927,750) (946,250) (965,188)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(283,333) (283,333) (283,333) (283,333)
(283,333) (283,333) (283,333) (283,333)
2,163,300 2,299,798 2,443,121 2,593,611
(883,563) (927,750) (946,250) (965,188)
(10,000) (10,000) (10,000) (10,000)
1,269,737 1,362,048 1,486,871 1,618,423
(380,921) (408,614) (446,061) (485,527)
888,816 953,434 1,040,810 1,132,896

283,333 283,333 283,333 283,333

1,172,149 1,236,767 1,324,143 1,416,230

1,172,149 1,236,767 1,324,143 1,416,230 7,295,362

0.7362 0.6647 0.6002 0.5419
862,883 822,078 794,724 767,487

1,618,222 2,854,989 4,179,133 5,595,362

1,003,309 1,825,387 2,620,111 3,387,599

14%
2,919,247

685,079
Cost of capital (WACC) 10.75%
Reduction (Patronage at 50%) 12.50%

Year 0 1 2
Net Investment
Renovation (800,000)
Equipment (900,000)
(1,700,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 50%) (1,650,000) (1,683,000)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (283,333) (283,333)
Capital Expenditure (283,333) (283,333)
1,909,493 2,033,301
Reduction from Revenue (1,650,000) (1,683,000)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT 249,493 340,301
Tax (74,848) (102,090)
Net Income 174,645 238,211
Add :
Depreciation 283,333 283,333
Free Cash Flow 457,979 521,544

Cash Flow (1,700,000) 457,979 521,544

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (1,700,000) 413,525 425,210

Accumulated Cash Flow (1,700,000) (1,242,021) (720,477)

Accumulated PV to CF (1,700,000) (1,286,475) (861,265)

Cost of Capital 8% 10.75% 12%

Net Present Value 959,509 735,244 642,744
Internal Rate of Return 23.46%
Profitability Index 1.4325
Payback Period 3.28
Discounted Payback 4.16
Return of Investment (ROI) 2.07
Equivalent Annual Annuity 225,174 172,545 150,837
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(1,767,125) (1,855,500) (1,892,500) (1,930,375)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(283,333) (283,333) (283,333) (283,333)
(283,333) (283,333) (283,333) (283,333)
2,163,300 2,299,798 2,443,121 2,593,611
(1,767,125) (1,855,500) (1,892,500) (1,930,375)
(10,000) (10,000) (10,000) (10,000)
386,175 434,298 540,621 653,236
(115,852) (130,289) (162,186) (195,971)
270,322 304,009 378,435 457,265

283,333 283,333 283,333 283,333

553,656 587,342 661,768 740,598

553,656 587,342 661,768 740,598 3,522,887

0.7362 0.6647 0.6002 0.5419
407,576 390,406 397,180 401,347

(166,821) 420,521 1,082,289 1,822,887

(453,689) (63,283) 333,896 735,244

14%
505,611

118,655
Cost of capital (WACC) 10.75%
Minimum Patronage at Lowest Investment for NPV = 0 14.23%

Year 0 1
Net Investment
Renovation (800,000)
Equipment (900,000)
(1,700,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 13.38%) (1,878,693)

Operating Cash Flow

Revenue 4,672,000
Less :
Food & Beverage Costs (1,168,000)
Other Operating Expenses (1,027,840)
Depreciation of Investment (283,333)
Capital Expenditure (283,333)
1,909,493
Reduction from Revenue (1,878,693)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 20,800
Tax 30% (6,240)
Net Income 14,560
Add :
Depreciation 283,333
Free Cash Flow 297,893

Cash Flow (1,700,000) 297,893

PV of 1 Factor 1.0000 0.9029
Present Value (1,700,000) 268,978

Accumulated Cash Flow (1,700,000) (1,402,107)

Accumulated PV to CF (1,700,000) (1,431,022)

Net Present Value (0)

Internal Rate of Return 10.75%
Profitability Index 1.0000
Payback Period 4.62
Discounted Payback 6.04
Return of Investment (ROI) 1.46
Equivalent Annual Annuity (0)
 2 3 4 5 6

13,464,000 14,137,000 14,844,000 15,140,000 15,443,000

(1,916,267) (2,012,052) (2,112,676) (2,154,804) (2,197,929)

4,905,600 5,150,880 5,408,424 5,678,845 5,962,787

(1,226,400) (1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,079,232) (1,133,194) (1,189,853) (1,249,346) (1,311,813)
(283,333) (283,333) (283,333) (283,333) (283,333)
(283,333) (283,333) (283,333) (283,333) (283,333)
2,033,301 2,163,300 2,299,798 2,443,121 2,593,611
(1,916,267) (2,012,052) (2,112,676) (2,154,804) (2,197,929)
(10,000) (10,000) (10,000) (10,000) (10,000)
107,034 141,248 177,122 278,317 385,682
(32,110) (42,374) (53,137) (83,495) (115,705)
74,924 98,873 123,985 194,822 269,977

283,333 283,333 283,333 283,333 283,333

358,257 382,207 407,319 478,155 553,311

358,257 382,207 407,319 478,155 553,311 2,477,141

0.8153 0.7362 0.6647 0.6002 0.5419
292,084 281,363 270,744 286,979 299,852

(1,043,850) (661,643) (254,324) 223,831 777,141

(1,138,938) (857,575) (586,831) (299,852) (0)
Cost of capital (WACC) 10.75%
Reduction (Patronage at 75%) 18.75%

Year 0 1 2
Net Investment
Renovation (800,000)
Equipment (900,000)
(1,700,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 75%) (2,475,000) (2,524,500)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (283,333) (283,333)
Capital Expenditure (283,333) (283,333)
1,909,493 2,033,301
Reduction from Revenue (2,475,000) (2,524,500)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT (575,507) (501,199)
Tax 172,652 150,360
Net Income (402,855) (350,839)
Add :
Depreciation 283,333 283,333
Free Cash Flow (119,521) (67,506)

Cash Flow (1,700,000) (119,521) (67,506)

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (1,700,000) (107,920) (55,037)

Accumulated Cash Flow (1,700,000) (1,819,521) (1,887,027)

Accumulated PV to CF (1,700,000) (1,807,920) (1,862,957)

Cost of Capital 8% 10.75% 12%

Net Present Value (1,925,119) (1,917,111) (1,913,566)
Internal Rate of Return
Profitability Index -0.1277
Payback Period >6
Discounted Payback >6
Return of Investment (ROI) -0.15
Equivalent Annual Annuity (451,781) (449,901) (449,069)
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(2,650,688) (2,783,250) (2,838,750) (2,895,563)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(283,333) (283,333) (283,333) (283,333)
(283,333) (283,333) (283,333) (283,333)
2,163,300 2,299,798 2,443,121 2,593,611
(2,650,688) (2,783,250) (2,838,750) (2,895,563)
(10,000) (10,000) (10,000) (10,000)
(497,388) (493,452) (405,629) (311,952)
149,216 148,036 121,689 93,586
(348,171) (345,416) (283,940) (218,366)

283,333 283,333 283,333 283,333

(64,838) (62,083) (607) 64,967

(64,838) (62,083) (607) 64,967 (249,588)

0.7362 0.6647 0.6002 0.5419
(47,731) (41,267) (364) 35,207

(1,951,865) (2,013,948) (2,014,555) (1,949,588)

(1,910,688) (1,951,954) (1,952,318) (1,917,111)

14%
(1,908,026)

(447,769)
Cost of capital (WACC) 10.75%
Reduction (Patronage at 25%) 6.25%

Year 0 1 2
Net Investment
Renovation (1,200,000)
Equipment (900,000)
(2,100,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 25%) (825,000) (841,500)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (350,000) (350,000)
Capital Expenditure (350,000) (350,000)
1,776,160 1,899,968
Reduction from Revenue (825,000) (841,500)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT 941,160 1,048,468
Tax (282,348) (314,540)
Net Income 658,812 733,928
Add :
Depreciation 350,000 350,000
Free Cash Flow 1,008,812 1,083,928

Cash Flow (2,100,000) 1,008,812 1,083,928

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (2,100,000) 910,891 883,716

Accumulated Cash Flow (2,100,000) (1,091,188) (7,260)

Accumulated PV to CF (2,100,000) (1,189,109) (305,393)

Cost of Capital 8% 10.75% 12%

Net Present Value 3,320,860 2,873,967 2,689,417
Internal Rate of Return 47.92%
Profitability Index 2.3686
Payback Period 2.01
Discounted Payback 2.36
Return of Investment (ROI) 3.40
Equivalent Annual Annuity 779,329 674,453 631,144
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(883,563) (927,750) (946,250) (965,188)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(350,000) (350,000) (350,000) (350,000)
(350,000) (350,000) (350,000) (350,000)
2,029,966 2,166,465 2,309,788 2,460,277
(883,563) (927,750) (946,250) (965,188)
(10,000) (10,000) (10,000) (10,000)
1,136,404 1,228,715 1,353,538 1,485,090
(340,921) (368,614) (406,061) (445,527)
795,483 860,100 947,477 1,039,563

350,000 350,000 350,000 350,000

1,145,483 1,210,100 1,297,477 1,389,563

1,145,483 1,210,100 1,297,477 1,389,563 7,135,362

0.7362 0.6647 0.6002 0.5419
843,252 804,353 778,719 753,036

1,138,222 2,348,323 3,645,799 5,035,362

537,859 1,342,212 2,120,931 2,873,967

14%
2,415,549

566,873
Cost of capital (WACC) 10.75%
Reduction (Patronage at 50%) 12.50%

Year 0 1 2
Net Investment
Renovation (1,200,000)
Equipment (900,000)
(2,100,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 50%) (1,650,000) (1,683,000)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (350,000) (350,000)
Capital Expenditure (350,000) (350,000)
1,776,160 1,899,968
Reduction from Revenue (1,650,000) (1,683,000)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT 116,160 206,968
Tax (34,848) (62,090)
Net Income 81,312 144,878
Add :
Depreciation 350,000 350,000
Free Cash Flow 431,312 494,878

Cash Flow (2,100,000) 431,312 494,878

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (2,100,000) 389,447 403,469

Accumulated Cash Flow (2,100,000) (1,668,688) (1,173,810)

Accumulated PV to CF (2,100,000) (1,710,553) (1,307,084)

Cost of Capital 8% 10.75% 12%

Net Present Value 436,232 221,612 133,107
Internal Rate of Return 14.03%
Profitability Index 1.1055
Payback Period 4.14
Discounted Payback 5.43
Return of Investment (ROI) 1.60
Equivalent Annual Annuity 102,374 52,007 31,237
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(1,767,125) (1,855,500) (1,892,500) (1,930,375)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(350,000) (350,000) (350,000) (350,000)
(350,000) (350,000) (350,000) (350,000)
2,029,966 2,166,465 2,309,788 2,460,277
(1,767,125) (1,855,500) (1,892,500) (1,930,375)
(10,000) (10,000) (10,000) (10,000)
252,841 300,965 407,288 519,902
(75,852) (90,289) (122,186) (155,971)
176,989 210,675 285,102 363,932

350,000 350,000 350,000 350,000

526,989 560,675 635,102 713,932

526,989 560,675 635,102 713,932 3,362,887

0.7362 0.6647 0.6002 0.5419
387,945 372,680 381,175 386,896

(646,821) (86,146) 548,955 1,262,887

(919,139) (546,459) (165,284) 221,612

14%
1,913

449
Cost of capital (WACC) 10.75%
Minimum Patronage at highest Investment for NPV = 0 13.02%

Year 0 1
Net Investment
Renovation (1,200,000)
Equipment (900,000)
(2,100,000)

Net Room Revenue 13,200,000

Reduction (Patronage at 11.97%) (1,718,931)

Operating Cash Flow

Revenue 4,672,000
Less :
Food & Beverage Costs (1,168,000)
Other Operating Expenses (1,027,840)
Depreciation of Investment (350,000)
Capital Expenditure (350,000)
1,776,160
Reduction from Revenue (1,718,931)
Increase Expenses for Repair and Maintenance (10,000)
EBIT 47,229
Tax (14,169)
Net Income 33,060
Add :
Depreciation 350,000
Free Cash Flow 383,060

Cash Flow (2,100,000) 383,060

PV of 1 Factor 1.0000 0.9029
Present Value (2,100,000) 345,878

Accumulated Cash Flow (2,100,000) (1,716,940)

Accumulated PV to CF (2,100,000) (1,754,122)

Net Present Value -

Internal Rate of Return 10.75%
Profitability Index 1.0000
Payback Period >6
Discounted Payback >6
Return of Investment (ROI) 1.45
Equivalent Annual Annuity -
 2 3 4 5 6

13,464,000 14,137,000 14,844,000 15,140,000 15,443,000

(1,753,310) (1,840,949) (1,933,016) (1,971,562) (2,011,019)

4,905,600 5,150,880 5,408,424 5,678,845 5,962,787

(1,226,400) (1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,079,232) (1,133,194) (1,189,853) (1,249,346) (1,311,813)
(350,000) (350,000) (350,000) (350,000) (350,000)
(350,000) (350,000) (350,000) (350,000) (350,000)
1,899,968 2,029,966 2,166,465 2,309,788 2,460,277
(1,753,310) (1,840,949) (1,933,016) (1,971,562) (2,011,019)
(10,000) (10,000) (10,000) (10,000) (10,000)
136,658 179,017 223,448 328,226 439,258
(40,997) (53,705) (67,035) (98,468) (131,777)
95,661 125,312 156,414 229,758 307,481

350,000 350,000 350,000 350,000 350,000

445,661 475,312 506,414 579,758 657,481

445,661 475,312 506,414 579,758 657,481 3,047,685

0.8153 0.7362 0.6647 0.6002 0.5419
363,343 349,903 336,613 347,959 356,304

(1,271,279) (795,967) (289,553) 290,205 947,685

(1,390,779) (1,040,876) (704,263) (356,304) -
Cost of capital (WACC) 10.75%
Reduction (Patronage at 75%) 18.75%

Year 0 1 2
Net Investment
Renovation (1,200,000)
Equipment (900,000)
(2,100,000)

Net Room Revenue 13,200,000 13,464,000

Reduction (Patronage at 75%) (2,475,000) (2,524,500)

Operating Cash Flow

Revenue 4,672,000 4,905,600
Less :
Food & Beverage Costs (1,168,000) (1,226,400)
Other Operating Expenses (1,027,840) (1,079,232)
Depreciation of Investment (350,000) (350,000)
Capital Expenditure (350,000) (350,000)
1,776,160 1,899,968
Reduction from Revenue (2,475,000) (2,524,500)
Increase Expenses for Repair and Maintenance (10,000) (10,000)
EBIT (708,840) (634,532)
Tax 212,652 190,360
Net Income (496,188) (444,172)
Add :
Depreciation 350,000 350,000
Free Cash Flow (146,188) (94,172)

Cash Flow (2,100,000) (146,188) (94,172)

PV of 1 Factor 1.0000 0.9029 0.8153
Present Value (2,100,000) (131,998) (76,778)

Accumulated Cash Flow (2,100,000) (2,246,188) (2,340,360)

Accumulated PV to CF (2,100,000) (2,231,998) (2,308,776)

Cost of Capital 8% 10.75% 12%

Net Present Value (2,448,396) (2,430,743) (2,423,203)
Internal Rate of Return
Profitability Index -0.1575
Payback Period >6
Discounted Payback >6
Return of Investment (ROI) -0.20
Equivalent Annual Annuity (574,582) (570,439) (568,669)
 3 4 5 6

14,137,000 14,844,000 15,140,000 15,443,000

(2,650,688) (2,783,250) (2,838,750) (2,895,563)

5,150,880 5,408,424 5,678,845 5,962,787

(1,287,720) (1,352,106) (1,419,711) (1,490,697)

(1,133,194) (1,189,853) (1,249,346) (1,311,813)
(350,000) (350,000) (350,000) (350,000)
(350,000) (350,000) (350,000) (350,000)
2,029,966 2,166,465 2,309,788 2,460,277
(2,650,688) (2,783,250) (2,838,750) (2,895,563)
(10,000) (10,000) (10,000) (10,000)
(630,721) (626,785) (538,962) (445,285)
189,216 188,036 161,689 133,586
(441,505) (438,750) (377,273) (311,700)

350,000 350,000 350,000 350,000

(91,505) (88,750) (27,273) 38,300

(91,505) (88,750) (27,273) 38,300 (409,588)

0.7362 0.6647 0.6002 0.5419
(67,362) (58,992) (16,369) 20,756

(2,431,865) (2,520,615) (2,547,888) (2,509,588)

(2,376,138) (2,435,130) (2,451,499) (2,430,743)

14%
(2,411,724)

(565,975)