The document outlines the details of a proposed hotel project in Lahore, Pakistan, including an estimated total cost of PKR 1.28 billion to be funded equally through equity and debt. It provides the projected after-tax net operating cash flows over 5 years. Key assumptions and the project scope involving a 100-room hotel are defined. Metrics like payback period, net present value (NPV), and internal rate of return (IRR) are identified to evaluate the project's viability against the investor's required 25% rate of return.
The document outlines the details of a proposed hotel project in Lahore, Pakistan, including an estimated total cost of PKR 1.28 billion to be funded equally through equity and debt. It provides the projected after-tax net operating cash flows over 5 years. Key assumptions and the project scope involving a 100-room hotel are defined. Metrics like payback period, net present value (NPV), and internal rate of return (IRR) are identified to evaluate the project's viability against the investor's required 25% rate of return.
The document outlines the details of a proposed hotel project in Lahore, Pakistan, including an estimated total cost of PKR 1.28 billion to be funded equally through equity and debt. It provides the projected after-tax net operating cash flows over 5 years. Key assumptions and the project scope involving a 100-room hotel are defined. Metrics like payback period, net present value (NPV), and internal rate of return (IRR) are identified to evaluate the project's viability against the investor's required 25% rate of return.
Certainly, let's adjust the assumptions and details to reflect the currency in Pakistani
Rupees (PKR) and the location in Lahore, Gulberg, Pakistan.
1. Estimated Cost of Project (in PKR):
Land and Building: PKR 800 million
Plant and Machinery: PKR 320 million Working Capital: PKR 160 million
Total Estimated Cost: PKR 1.28 billion
2. Source of Finance:
Equity: PKR 640 million
Debt (Bank Loan): PKR 640 million
3. 5 Years After-Tax Net Operating Cash Flows (NOCF) (in PKR):
Year 1: PKR 64 million
Year 2: PKR 76.8 million Year 3: PKR 89.6 million Year 4: PKR 102.4 million Year 5: PKR 115.2 million
4. Assumptions:
Occupancy Rate: 70%
Average Room Rate: PKR 15,000 per night Operating Expenses: 60% of revenue Tax Rate: 30%
5. Project Scope:
Products: Hotel services, rooms, restaurant, event spaces.
Location: Lahore, Gulberg, Pakistan. Land and Building: 50,000 sq. ft. with 100 rooms. Plant and Machinery: Furnishings, kitchen equipment, etc. Working Capital Requirements: Covers day-to-day operational costs. 6. Payback Period, NPV, and IRR:
Payback Period: Determine when the initial investment is recovered.
Net Present Value (NPV): Discount future cash flows to present value. Internal Rate of Return (IRR): Find the rate of return that makes NPV zero.
7. Investor's Required Rate of Return:
Assuming a 25% required rate of return.
Conclusion/Analysis:
Payback Period: Ideally, shorter is better.
NPV: A positive NPV indicates a potentially profitable project. IRR: Should be greater than the required rate of return for a viable investment.