A twenty five room budget motel expects its occupancy next year to be 80%. The owner's present investment is $200,800. They want an aftertax return on their investment of 10%. Tax rate is 50 percent. Interest on a long-term mortgage is 10%. Present balance outstanding is $403,200. Depreciation is 10% on building (present book value is $305,100) and 20% on furniture and equipment (present book value is $75,000). Other fixed charges add up to $70,900 a year. At an occupancy of 80%, the motel's operating expenses (wages, supplies, laundry, and so on) are calculated to be $27,700 a year. The motel has other income (from vending machines) of $2,600 a year. Rooms department direct expenses are $10 per room sold. To cover all expenses and produce the net income required, what should the motel's average room rate be next year?
A twenty five room budget motel expects its occupancy next year to be 80%. The owner's present investment is $200,800. They want an aftertax
Interest on a long-term mortgage is 10%. Present balance outstanding is $403,200.
Other fixed charges add up to $70,900 a year.
At an occupancy of 80%, the motel's operating expenses (wages, supplies, laundry, and so on) are calculated to be $27,700 a year.
The motel has other income (from vending machines) of $2,600 a year.
Rooms department direct expenses are $10 per room sold.
To cover all expenses and produce the net income required, what should the motel's average room rate be next year?
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