The Road Stop Is a National Hotel Chain with a Cost

Multiple Choice

The Road Stop is a national hotel chain with a cost of capital of 12.4 percent. This chain is considering opening a high-end resort that is expected to have a cost of capital that is at least 13 percent. The estimated net present value of the resort project is $500 when discounted at 12.4 percent. The best representation of this situation is that the resort project should:

A) be accepted immediately.
B) be financed solely with debt in order for the project to have a positive NPV.
C) probably be put on hold until its cost of capital can be lowered.
D) be permanently rejected.
E) probably be expanded.