Investment Appraisal for a Motel

Carried out an Investment appraisal for a local authority looking to re open a motel that had been closed for some years. The investment appraisal was for a forecasted period of five years.

I came up with a cost of equity by incorporating a P/E ratio of a comparable business to the motel the organization was looking to open.

I began with the proposed investment amount which was ZMW 1,000,000 then the following year proposed revenue which would increase at a rate of 2% for the next four years. The costs would increase at a rate of 1%. I incorporated tax and interest payments, the cost of equity was calculated at 10%. Ultimately the appraisal yielded a positive net present value and the motel is currently open and Operational.