What must the new worth of the hotel when the franchise

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Reference no: EM132005472

Suppose that everything is the same as in that problem except TWO things: the worth of the hotel, should the city be awarded the franchise, is not $8 million but some unknown smaller number; and the probability of getting the franchise is NOT 50% but is upgraded to 80%.

What must the new worth of the hotel when the franchise is granted be in order for the NPV of the Sporthotel project to be equal to exactly zero?

a. The value of the hotel should the city be awarded the franchise = $4.50 million

b. The value of the hotel should the city be awarded the franchise = $5.25 million

c. The value of the hotel should the city be awarded the franchise = $5 million

d. The value of the hotel should the city be awarded the franchise = $6.50 million

e. The value of the hotel should the city be awarded the franchise = $6.00 million

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Reference no: EM132005472

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