Question 4.1 Hotel+ is considering building a budget hotel that offers clean small rooms with bathrooms. The company anticipates that 120 rooms will rent for 39,600 room-nights per year. The market price for equivalent rooms is $60 per night. Hotel+ estimates that the capital cost will be $6,500,000 andA the company would like an annual return of 10%. Following are the estimated annual operating costs: Variable operating costs $ 21 per room night Fixed costs: Salaries and wages $ 420,000 Building maintenance 89,000 General administration 280,000 Total fixed costs $ 789,000 Required What is the full cost per room-night? Can Hotel+ meet the targeted return on investment based on the estimated costs and revenue? Show your calculations. A tour operator has offered $30 per night for 20 rooms during a time of the year that there is likely to be at least that many rooms vacant. Should Hotel+ accept this offer? Show your calculations.
Question 4.1 Hotel+ is considering building a budget hotel that offers clean small rooms with bathrooms. The company anticipates that 120 rooms will rent for 39,600 room-nights per year. The market price for equivalent rooms is $60 per night. Hotel+ estimates that the capital cost will be $6,500,000 andA the company would like an annual return of 10%. Following are the estimated annual operating costs: Variable operating costs $ 21 per room night Fixed costs: Salaries and wages $ 420,000 Building maintenance 89,000 General administration 280,000 Total fixed costs $ 789,000 Required What is the full cost per room-night? Can Hotel+ meet the targeted return on investment based on the estimated costs and revenue? Show your calculations. A tour operator has offered $30 per night for 20 rooms during a time of the year that there is likely to be at least that many rooms vacant. Should Hotel+ accept this offer? Show your calculations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 4.1
Hotel+ is considering building a budget hotel that offers clean small rooms with bathrooms. The company anticipates that 120 rooms will rent for 39,600 room-nights per year. The market price for equivalent rooms is $60 per night. Hotel+ estimates that the capital cost will be $6,500,000 andA the company would like an annual return of 10%. Following are the estimated annual operating costs:
|
Variable operating costs |
$ 21 per room night |
|
Fixed costs: |
|
|
Salaries and wages |
$ 420,000 |
|
Building maintenance |
89,000 |
|
General administration |
280,000 |
|
Total fixed costs |
$ 789,000 |
Required
- What is the full cost per room-night?
- Can Hotel+ meet the targeted return on investment based on the estimated costs and revenue? Show your calculations.
- A tour operator has offered $30 per night for 20 rooms during a time of the year that there is likely to be at least that many rooms vacant. Should Hotel+ accept this offer? Show your calculations.
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