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f the estimated demand is 20,000 room-nights, the break-even price is s capital is the opportunity cost, or true cost, of making an investment.) per room, per night. (Hint: Remember that the c

f the estimated demand is 20,000 room-nights, the break-even price is s capital is the opportunity cost, or true cost, of making an investment.) per room, per night. (Hint: Remember that the c

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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In early 2008, you purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession would kill the demand for conventions. Now, you forecast that you will be able to sell only 20,000 room-nights, which cost $50 per room per night to service. You spent $20.00 million on the hotel in 2008, and your cost of capital is 25%. The current going price to sell the hotel is $15 million. If the estimated demand is 20,000 room-nights, the break-even price is $ capital is the opportunity cost, or true cost, of making an investment.) per room, per night. (Hint: Remember that the cost of
Transcribed Image Text:In early 2008, you purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession would kill the demand for conventions. Now, you forecast that you will be able to sell only 20,000 room-nights, which cost $50 per room per night to service. You spent $20.00 million on the hotel in 2008, and your cost of capital is 25%. The current going price to sell the hotel is $15 million. If the estimated demand is 20,000 room-nights, the break-even price is $ capital is the opportunity cost, or true cost, of making an investment.) per room, per night. (Hint: Remember that the cost of
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