Phuket Beach

In: Business and Management

Submitted By Nikoletta2010
Words 1209
Pages 5
{draw:g} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} Table of Contents Declaration This report is submitted as partial fulfilment of the requirements for Module MBA 407 Financial Management at the European Business School London in spring 2010. We declare that this document embodies the results of the group’s work and that it has been composed by the group. Following normal academic conventions, we have made due acknowledgement of the work of others. We have worked together as a group and we have all contributed equally and would therefore be graded as a group. …………..…………………………… Fouad El Ghzal …………..…………………………… Nikola Pamler …………..…………………………… Ulrich Sommer Executive Summary This paper assesses the different benefits and costs associated with each of the capital projects, Planet Karaoke Pub that offered to sign a four-year lease agreement and Beach Karaoke Pub that offered to sign a six-year lease. It develops in general, the relevant incremental cash flows for each option and the appropriate discount rate for discounting the incremental cash flows. Different evaluation criteria are used to rank the projects like internal rate of return (IRR), net present value (NPV), with the weighted average cost of capital (WACC) used as the discount factor, and the use of profitability index for comparison. The average return on the investment (ROI) and payback period that are usually used by Phuket Beach Hotel when evaluating capital projects are also considered. Despite the calculated financial benefits of each option, other risk factors, like the uncertainty of income, were considerably higher in importance when deciding on which project is most suitable for this investment recommendation. Therefore, in deciding the best investment option, fixed rental income over a shorter…...

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