You have the following information regarding a hotel that you wish to purchase and are trying to decide if the hotel is a good investment from a break-even perspective. Figure out the Break Even Point (BEP) including the return on investment (you do not have to worry about income tax). What would be the average daily rate (ADR) for the calculated BEP? Rooms 200 Occupancy (open 365 days a year) 78% Owner's Investment $ 5,000,000.00 Return on Investment 10% Loan $ 15,000,000.00 Interest Rate on Loan 4% Total Other Fixed Costs $ 3,400,000.00 Total Variable Cost Percentage 25% Breakeven Point Average Daily Rate
You have the following information regarding a hotel that you wish to purchase and are trying to decide if the hotel is a good investment from a break-even perspective. Figure out the Break Even Point (BEP) including the return on investment (you do not have to worry about income tax). What would be the average daily rate (ADR) for the calculated BEP? Rooms 200 Occupancy (open 365 days a year) 78% Owner's Investment $ 5,000,000.00 Return on Investment 10% Loan $ 15,000,000.00 Interest Rate on Loan 4% Total Other Fixed Costs $ 3,400,000.00 Total Variable Cost Percentage 25% Breakeven Point Average Daily Rate
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
Related questions
Question
You have the following information regarding a hotel that you wish to purchase and are trying to decide if the hotel is a good investment from a break-even perspective.
Figure out the Break Even Point (BEP) including the
| Rooms | 200 |
| Occupancy (open 365 days a year) | 78% |
| Owner's Investment | $ 5,000,000.00 |
| Return on Investment | 10% |
| Loan | $ 15,000,000.00 |
| Interest Rate on Loan | 4% |
| Total Other Fixed Costs | $ 3,400,000.00 |
| Total Variable Cost Percentage | 25% |
| Breakeven Point | |
| Average Daily Rate |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education