La Moreneta
La Moreneta Hotel
A group of debt holders is considering cancel an outstanding debt from La Moreneta
C.A., a Construction Company by receiving a small Hotel in Calella de Mar, because La
Moreneta C.A. can’t produce enough Cash Flow to meet its short term obligations. The outstanding debt of La Moreneta is an amount totalling €140,000. This price represents the value of all the furniture, Machines and Equipments and will cancel all the outstanding debt. La Moreneta C.A. owns the building and they won’t charge rent for the next 5 years.
Investors are not sure about the future revenues. However, they make some conservative projections, and estimate that the Hotel will bring in revenues of about €92,000 per year.
The corporate tax rate in Spain for a Hotel is 34%. The operating and maintenance costs will be about €31,000 per year.
The estimated inflation is 2% yearly, along the next four years
They plan to sell back the hotel in 4 years, and they estimate that they could receive an equivalent of the estimated yearly revenues in cash at the end of year 4 (as a final salvage cost). Market rate is 11%, risk free rate is 2,50% and Beta for this industry is 2,75
For a financial analysis, apply an ACRM (Accelerated Cost Recovery Method) depreciation of the investment (assuming 5 years life)
1.
2.
3.
4.
Calculate the annual cash flow from the hotels revenues and operations.
Based on previous questions, calculate the IRR of the hotel investment.
What will the payback period be if the projections of the investors are right?
How much money is the instant profit by accepting this Hotel as a debt cancelation? 5. How much should be the Revenues on first year, to get a return of 30% in this deal
Create an Excel File. Name it your LastName_Name_ LaMoreneta
LANAU, José Antonio
1
A group of debt holders is considering cancel an outstanding debt from La Moreneta
C.A., a Construction Company by receiving a small Hotel in Calella de Mar, because La
Moreneta C.A. can’t produce enough Cash Flow to meet its short term obligations. The outstanding debt of La Moreneta is an amount totalling €140,000. This price represents the value of all the furniture, Machines and Equipments and will cancel all the outstanding debt. La Moreneta C.A. owns the building and they won’t charge rent for the next 5 years.
Investors are not sure about the future revenues. However, they make some conservative projections, and estimate that the Hotel will bring in revenues of about €92,000 per year.
The corporate tax rate in Spain for a Hotel is 34%. The operating and maintenance costs will be about €31,000 per year.
The estimated inflation is 2% yearly, along the next four years
They plan to sell back the hotel in 4 years, and they estimate that they could receive an equivalent of the estimated yearly revenues in cash at the end of year 4 (as a final salvage cost). Market rate is 11%, risk free rate is 2,50% and Beta for this industry is 2,75
For a financial analysis, apply an ACRM (Accelerated Cost Recovery Method) depreciation of the investment (assuming 5 years life)
1.
2.
3.
4.
Calculate the annual cash flow from the hotels revenues and operations.
Based on previous questions, calculate the IRR of the hotel investment.
What will the payback period be if the projections of the investors are right?
How much money is the instant profit by accepting this Hotel as a debt cancelation? 5. How much should be the Revenues on first year, to get a return of 30% in this deal
Create an Excel File. Name it your LastName_Name_ LaMoreneta
LANAU, José Antonio
1