Year 1

Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

20
$367,500.00 =
20 rooms
$225,000.00 =
20 rooms
$592,500.00
$75,000.00 =
3 people
$21,000.00 =
20 rooms
$18,000.00 =
20 rooms
$60,000.00 = 60,000 dollars
$174,000.00

$11,850.00
$15,000.00 =
$26,850.00

Year 2
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$376,687.50 =
20 rooms
$230,625.00 =
20 rooms
$607,312.50
$76,875.00 =
3 people
$21,525.00 =
20 rooms
$18,450.00 =
20 rooms
$60,000.00 = 60,000 dollars
$176,850.00

Operating Profit
Year 3
Price Increase
Number of Rooms
Revenue (Winter)

*
10
*
70%
*
60%
+ 3,000

10000 $ in May + 5,000

$391,650.00

Operating Expense
Property Taxes
General Maintance
Total Operating Expense

70%
60%

$592,500.00
$174,000.00
$418,500.00

Operating Profit

Sales
COGS
Gross Profit

*
*

*
*

70%
60%

*
10
*
70%
*
60%
+ 3,000

$607,312.50
$176,850.00
$430,462.50

$12,146.25
$15,000.00 =
$27,146.25

10000 $ in May + 5,000

$403,316.25

2.50%
20
$386,104.69 =

20 rooms

70%

Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

$236,390.63 =
20 rooms
$622,495.31
$78,796.88 =
3 people
$22,063.13 =
20 rooms
$18,911.25 =
20 rooms
$63,000.00 = 60,000 dollars
$182,771.25

$12,449.91
$15,000.00 =
$27,449.91

*
10
*
70%
*
60%
+ 3,000

10000 $ in May + 5,000

$412,274.16

Year 4
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$395,757.30 =
20 rooms
$242,300.39 =
20 rooms
$638,057.70
$80,766.80 =
3 people
$22,614.70 =
20 rooms
$19,384.03 =
20 rooms
$63,000.00 = 60,000 dollars
$185,765.53

Operating Expense
Property Taxes
General Maintance
Total Operating Expense

60%

$622,495.31
$182,771.25
$439,724.06

Operating Profit

Sales
COGS
Gross Profit

*
*

70%
60%

*
10
*
70%
*
60%
+ 3,000

$638,057.70
$185,765.53
$452,292.16

$12,761.15
$15,000.00 =
$27,761.15

Operating Profit

$424,531.01

Year 5
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)

2.50%
20
$405,651.24 =
$248,357.90 =
$654,009.14
$82,785.97 =
$23,180.07 =

10000 $ in May + 5,000

20 rooms
20 rooms

*
*

70%
60%

3 people
20 rooms

*
*

10
70%

Cleaners cost (summer)

Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Total Operating Profit

$19,868.63 =
20 rooms
$66,000.00 = 60,000 dollars
$191,834.67

*
60%
+ 3,000

$654,009.14
$191,834.67
$462,174.47

$13,080.18
$15,000.00 =
$28,080.18
$434,094.29
$2,065,865.70

10000 $ in May + 5,000

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

*
*

30 days *
30 days *

175 $ per night

125 $ per night

2,500 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10 $ per night
10 $ per night

*
*

30 days *
30 days *

179.375 $ per night

128.125 $ per night

2,563 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10.25 $ per night

10.25 $ per night

30 days *

183.859375 $ per night

$ in November

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

$ in November

occupancy

5 months

occupancy

months
occupancy
occupancy
dollars

*
*
*
*

5 months

30 days *

131.328125 $ per night

2,627 $ per month

5 months
*
5 months
*
1 multiplier

30 days *
30 days *

10.50625 $ per night

10.50625 $ per night

$ in November

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

*
*

2,692 $ per month

5 months
*
5 months
*
1 multiplier

30 days * 188.45585938 $ per night

30 days * 134.61132813 $ per night

30 days *
30 days *

10.76890625 $ per night

10.76890625 $ per night

$ in November

occupancy
occupancy

*
*

months
occupancy

*
*

5 months
5 months

*
*

30 days * 193.16725586 $ per night

30 days * 137.97661133 $ per night

2,760 $ per month

5 months
*

30 days * 11.038128906 $ per night

occupancy
dollars

$ in November

*
*

5 months
2 multiplier

30 days * 11.038128906 $ per night

Increase in ultilization
Year 1
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

5%

20
$393,750.00 =
20 rooms
$243,750.00 =
20 rooms
$637,500.00
$75,000.00 =
3 people
$22,500.00 =
20 rooms
$19,500.00 =
20 rooms
$60,000.00 = 60,000 dollars
$177,000.00

$12,750.00
$15,000.00 =
$27,750.00

Year 2
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$403,593.75 =
20 rooms
$249,843.75 =
20 rooms
$653,437.50
$76,875.00 =
3 people
$23,062.50 =
20 rooms
$19,987.50 =
20 rooms
$60,000.00 = 60,000 dollars
$179,925.00

Operating Profit
Year 3
Price Increase

*
10
*
75%
*
65%
+ 3,000

10000 $ in May + 5,000

$432,750.00

Operating Expense
Property Taxes
General Maintance
Total Operating Expense

75%
65%

$637,500.00
$177,000.00
$460,500.00

Operating Profit

Sales
COGS
Gross Profit

*
*

*
*

75%
65%

*
10
*
75%
*
65%
+ 3,000

$653,437.50
$179,925.00
$473,512.50

$13,068.75
$15,000.00 =
$28,068.75
$445,443.75

2.50%

10000 $ in May + 5,000

Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

20
$413,683.59 =
20 rooms
$256,089.84 =
20 rooms
$669,773.44
$78,796.88 =
3 people
$23,639.06 =
20 rooms
$20,487.19 =
20 rooms
$63,000.00 = 60,000 dollars
$185,923.13

$13,395.47
$15,000.00 =
$28,395.47

*
10
*
75%
*
65%
+ 3,000

10000 $ in May + 5,000

$455,454.84

Year 4
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$424,025.68 =
20 rooms
$262,492.09 =
20 rooms
$686,517.77
$80,766.80 =
3 people
$24,230.04 =
20 rooms
$20,999.37 =
20 rooms
$63,000.00 = 60,000 dollars
$188,996.20

Operating Expense
Property Taxes
General Maintance
Total Operating Expense

75%
65%

$669,773.44
$185,923.13
$483,850.31

Operating Profit

Sales
COGS
Gross Profit

*
*

*
*

75%
65%

*
10
*
75%
*
65%
+ 3,000

$686,517.77
$188,996.20
$497,521.57

$13,730.36
$15,000.00 =
$28,730.36

Operating Profit

$468,791.21

Year 5
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year

2.50%
20
$434,626.33 =
$269,054.39 =
$703,680.72

10000 $ in May + 5,000

20 rooms
20 rooms

*
*

75%
65%

Staff Cost per year

Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Total Operating Profit
Incremental Profit

$82,785.97 =
3 people
$24,835.79 =
20 rooms
$21,524.35 =
20 rooms
$66,000.00 = 60,000 dollars
$195,146.11

*
10
*
75%
*
65%
+ 3,000

$703,680.72
$195,146.11
$508,534.61

$14,073.61
$15,000.00 =
$29,073.61
$479,461.00
$2,281,900.80
$216,035.10

10000 $ in May + 5,000

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

*
*

30 days *
30 days *

175 $ per night

125 $ per night

2,500 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10 $ per night
10 $ per night

*
*

30 days *
30 days *

179.375 $ per night

128.125 $ per night

2,563 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10.25 $ per night

10.25 $ per night

$ in November

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

$ in November

5 months
5 months

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

*
*

30 days *
30 days *

183.859375 $ per night

131.328125 $ per night

2,627 $ per month

5 months
*
5 months
*
1 multiplier

30 days *
30 days *

10.50625 $ per night

10.50625 $ per night

$ in November

occupancy
occupancy

*
*

months
occupancy
occupancy
dollars

*
*
*
*

5 months
5 months

*
*

2,692 $ per month

5 months
*
5 months
*
1 multiplier

30 days * 188.45585938 $ per night

30 days * 134.61132813 $ per night

30 days *
30 days *

10.76890625 $ per night

10.76890625 $ per night

$ in November

occupancy
occupancy

*
*

5 months
5 months

*
*

30 days * 193.16725586 $ per night

30 days * 137.97661133 $ per night

months
occupancy
occupancy
dollars

$ in November

*
*
*
*

2,760 $ per month

5 months
*
5 months
*
2 multiplier

30 days * 11.038128906 $ per night

30 days * 11.038128906 $ per night

Year 1
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

20
$367,500.00 =
20 rooms
$225,000.00 =
20 rooms
$592,500.00
$75,000.00 =
3 people
$21,000.00 =
20 rooms
$18,000.00 =
20 rooms
$60,000.00 = 60,000 dollars
$174,000.00

$11,850.00
$15,000.00 =
$26,850.00

10000 $ in May +

$391,650.00
$137,077.50
$254,572.50

Year 2
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$376,687.50 =
20 rooms
$230,625.00 =
20 rooms
$607,312.50
$76,875.00 =
3 people
$21,525.00 =
20 rooms
$18,450.00 =
20 rooms
$60,000.00 = 60,000 dollars
$176,850.00

Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Taxes (35%)
Net Income

*
*
*
+

$592,500.00
$174,000.00
$418,500.00

Operating Profit
Taxes (35%)
Net Income

Sales
COGS
Gross Profit

*
*

*
*
*
*
*
+

$607,312.50
$176,850.00
$430,462.50

$12,146.25
$15,000.00 =
$27,146.25
$403,316.25
$141,160.69
$262,155.56

10000 $ in May +

Year 3
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

2.50%
20
$386,104.69 =
20 rooms
$236,390.63 =
20 rooms
$622,495.31
$78,796.88 =
3 people
$22,063.13 =
20 rooms
$18,911.25 =
20 rooms
$63,000.00 = 60,000 dollars
$182,771.25

$12,449.91
$15,000.00 =
$27,449.91

10000 $ in May +

$412,274.16
$144,295.95
$267,978.20

Year 4
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$395,757.30 =
20 rooms
$242,300.39 =
20 rooms
$638,057.70
$80,766.80 =
3 people
$22,614.70 =
20 rooms
$19,384.03 =
20 rooms
$63,000.00 = 60,000 dollars
$185,765.53

Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Taxes (35%)
Net Income

*
*
*
+

$622,495.31
$182,771.25
$439,724.06

Operating Profit
Taxes (35%)
Net Income

Sales
COGS
Gross Profit

*
*

*
*
*
*
*
+

$638,057.70
$185,765.53
$452,292.16

$12,761.15
$15,000.00 =
$27,761.15
$424,531.01
$148,585.85
$275,945.16

10000 $ in May +

Year 5
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Taxes (35%)
Net Income
Total Operating Profit
Average operating profit

2.50%
20
$405,651.24 =
20 rooms
$248,357.90 =
20 rooms
$654,009.14
$82,785.97 =
3 people
$23,180.07 =
20 rooms
$19,868.63 =
20 rooms
$66,000.00 = 60,000 dollars
$191,834.67

*
*
*
*
*
+

$654,009.14
$191,834.67
$462,174.47

$13,080.18
$15,000.00 =
$28,080.18

10000 $ in May +

$434,094.29
$151,933.00
$282,161.29
$2,065,865.70
$413,173.14 *

19.5 times

70% occupancy
60% occupancy

*
*

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

5 months
5 months

*
*

30 days *
30 days *

175
125

2,500 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10
10

*
*

30 days *
30 days *

179.375
128.125

2,563 $ per month

5 months
*
5 months
*
0 multiplier

30 days *
30 days *

10.25
10.25

5,000 $ in November

70% occupancy
60% occupancy

*
*

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

5,000 $ in November

5 months
5 months

70% occupancy
60% occupancy

*
*

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

5 months
5 months

*
*

30 days *
30 days *

183.859375
131.328125

2,627 $ per month

5 months
*
5 months
*
1 multiplier

30 days *
30 days *

10.50625
10.50625

5,000 $ in November

70% occupancy
60% occupancy

*
*

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

5,000 $ in November

5 months
5 months

*
*

2,692 $ per month

5 months
*
5 months
*
1 multiplier

30 days * 188.45585938
30 days * 134.61132813

30 days *
30 days *

10.76890625
10.76890625

70% occupancy
60% occupancy

*
*

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

5,000 $ in November

$8,056,876.24

5 months
5 months

*
*

30 days * 193.16725586
30 days * 137.97661133

2,760 $ per month

5 months
*
5 months
*
2 multiplier

30 days * 11.038128906
30 days * 11.038128906

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

$ per night
$ per night

CAPM Calculation
beta
risk-free rate
Equity market
Discount rate:
Year
Profit
PV
NPV

1.1
2.25% 10 yr rate
7.00%
7.48%
0

7.48%
$ 4,749,140.03

Source: http://finance.yahoo.com/q/ks?s=IHG+
Source: http://www.treasury.gov/resource-cente
Expected long-term market return

1
2
3
$ 254,572.50 $ 262,155.56 $ 267,978.20
$ 236,866.71 $ 226,957.31 $ 215,862.45

.yahoo.com/q/ks?s=IHG+Key+Statistics
easury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
market return

4
5
6
$ 275,945.16 $ 282,161.29 $
287,804.51
$ 206,820.20 $ 196,770.58 $
186,746.67
Perpetual PV from Y5 (inclusive) $

r
Ratio of PV growth
Yr = Y5* (1.02)^(r-5) 0.949058
Yr/(1+discount)^r
3,862,633.36

atio of PV growth

Assume that GM is still hired in Year 2. Also, general renovation and maintenance cost mus
Year 1
Number of Rooms
20
Revenue (Winter)
$367,500.00 =
20 rooms
Revenue (Summer)
$225,000.00 =
20 rooms
Total Revenue per year
$592,500.00
Staff Cost per year
$75,000.00 =
3 people
Cleaners cost (winter)
$21,000.00 =
20 rooms
Cleaners cost (summer)
$18,000.00 =
20 rooms
Manager cost per year
$60,000.00 =
60,000 dollars
Total cost per year
$174,000.00
Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

$592,500.00
$174,000.00
$418,500.00

$11,850.00
$15,000.00 =
$26,850.00

Operating Profit
Taxes (35%)
Net Income

$391,650.00
$137,077.50
$254,572.50

Year 2
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
20
$376,687.50 =
$0.00 =
$376,687.50
$38,437.50 =
$21,525.00 =
$0.00 =
$60,000.00 =
$119,962.50

Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit

10000 $ in May

20 rooms
20 rooms
3 people
20 rooms
20 rooms
60,000 dollars

$376,687.50
$119,962.50
$256,725.00

$7,533.75
$15,000.00 =
$22,533.75
$234,191.25

10000 $ in May

Taxes (35%)
Net Income

$81,966.94
$152,224.31

Year 3
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
30
$496,420.31 =
$295,488.28 =
$791,908.59
$78,796.88 =
$28,366.88 =
$23,639.06 =
$63,000.00 =
$193,802.81

Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense

$15,838.17
$15,000.00 =
$30,838.17
$567,267.61
$198,543.66
$368,723.95

Year 4
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
30
$551,233.39 =
$333,163.04 =
$884,396.43
$80,766.80 =
$31,499.05 =
$26,653.04 =
$63,000.00 =
$201,918.89

Operating Expense
Property Taxes
General Maintance

3 people
30 rooms
30 rooms
60,000 dollars

$791,908.59
$193,802.81
$598,105.78

Operating Profit
Taxes (35%)
Net Income

Sales
COGS
Gross Profit

30 rooms
30 rooms

10000 $ in May

30 rooms
30 rooms
3 people
30 rooms
30 rooms
60,000 dollars

$884,396.43
$201,918.89
$682,477.54

$17,687.93
$15,000.00 =

10000 $ in May

Total Operating Expense

$32,687.93

Operating Profit
Taxes (35%)
Net Income

$649,789.61
$227,426.36
$422,363.24

Year 5
Price Increase
Number of Rooms
Revenue (Winter)
Revenue (Summer)
Total Revenue per year
Staff Cost per year
Cleaners cost (winter)
Cleaners cost (summer)
Manager cost per year
Total cost per year

2.50%
30
$608,476.86 =
$372,536.85 =
$981,013.71
$82,785.97 =
$34,770.11 =
$29,802.95 =
$66,000.00 =
$213,359.02

Sales
COGS
Gross Profit
Operating Expense
Property Taxes
General Maintance
Total Operating Expense
Operating Profit
Taxes (35%)
Net Income
Total Operating Profit
Average operating profit

30 rooms
30 rooms
3 people
30 rooms
30 rooms
60,000 dollars

$981,013.71
$213,359.02
$767,654.69

$19,620.27
$15,000.00 =
$34,620.27

10000 $ in May

$733,034.41
$256,562.04
$476,472.37
$2,575,932.88
$515,186.58 *

19.5 times

ntenance cost must still be paid

*
*

70% occupancy
60% occupancy

*
*

5 months
5 months

*
*

30 days
30 days

*
*

*
*
*
+

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

2,500 $ per month

5 months
5 months
0 multiplier

*
*

30 days
30 days

*
*

5,000 $ in November

70% occupancy
0% occupancy

*
*

5 months
5 months

*
*

30 days
30 days

*
*

*
*
*
+

5 months
70% occupancy
0% occupancy
3,000 dollars

*
*
*
*

2,563 $ per month

5 months
5 months
0 multiplier

*
*

30 days
30 days

*
*

5,000 $ in November

*
*

*
*

60% occupancy
50% occupancy

*
*

5 months
5 months

*
*

30 days
30 days

*
*

*
*
*
+

10 months
60% occupancy
50% occupancy
3,000 dollars

*
*
*
*

2,627 $ per month

5 months
5 months
1 multiplier

*
*

30 days
30 days

*
*

5,000 $ in November

65% occupancy
55% occupancy

*
*

5 months
5 months

*
*

30 days
30 days

*
*

*
*
*
+

10 months
65% occupancy
55% occupancy
3,000 dollars

*
*
*
*

2,692 $ per month

5 months
5 months
1 multiplier

*
*

30 days
30 days

*
*

5,000 $ in November

*
*

*
*

70% occupancy
60% occupancy

*
*

5 months
5 months

*
*

30 days
30 days

*
*

*
*
*
+

10 months
70% occupancy
60% occupancy
3,000 dollars

*
*
*
*

2,760 $ per month

5 months
5 months
2 multiplier

*
*

30 days
30 days

*
*

5,000 $ in November

$10,046,138.22

175 $ per night

125 $ per night

10 $ per night
10 $ per night

179.375 $ per night

128.125 $ per night

10.25 $ per night

10.25 $ per night

183.859375 $ per night

131.328125 $ per night

10.50625 $ per night

10.50625 $ per night

188.455859375 $ per night

134.611328125 $ per night

10.76890625 $ per night

10.76890625 $ per night

193.1672558594 $ per night

137.9766113281 $ per night

11.0381289063 $ per night

11.0381289063 $ per night

CAPM Calculation
beta
risk-free rate
Equity market
Discount rate:
Year
Profit
Extension Cost
PV
7.48%
NPV
$ 6,639,138.61
NPV Incr
$ 1,889,998.58

1.1
2.25% 10 yr rate
7.00%
7.48%
0

Source: http://finance.yahoo.com/q/ks?s=IHG+
Source: http://www.treasury.gov/resource-cente
Expected long-term market return

1
2
3
$ 254,572.50 $
152,224.31 $ 368,723.95
-$ 1,000,000.00
$ 236,866.71 -$
733,949.28 $ 297,015.41

ahoo.com/q/ks?s=IHG+Key+Statistics
sury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
rket return

4
5
$ 422,363.24 $ 476,472.37 $

6 r
Ratio of PV growth
486,001.81 Yr = Y5* (1.02)^(r-5) 0.949058

$ 316,560.19 $ 332,277.13 $
315,350.24 Yr/(1+discount)^r
Perpetual PV from Y5 (inclusive) $
6,522,645.57

atio of PV growth

Market Price and Share Calculation

NPV of Expansion Project
NPV of Normal Op
Maximum Dilution for Positive NPV
Maximum Ext Invest Hold
Maximum No. of Shares Issued
Shares Issued (Rounded Down)
Share Price

$6,639,138.61
$4,749,140.03
71.53% = $4,749,140.03 NPV
/
28.47% =
100%
397.96648701 =
1000 shares /
397
$2,518.89 = $1,000,000.00 capital /

$6,639,138.61 NPV
71.53%
71.53%
397 shares

1000 shares