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# Homework 8 - Food& Beverage \$40,000 Telephone 10,000...

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This homework problem is basically a replication of the example on pp. 368-371, with numbers changed. Please review the example, in particular my correction for Exhibit 3 in the outline before you do the homework. The Vacation Lodge, a 100-room hotel, is projected to cost \$5,000,000 including land, building, equipment, furniture, and working capital. The hotel is financed with a loan of \$3,000,000 at 10 percent annual interest with the owners providing cash of \$2,000,000. The owners desire a 12 percent annual return on their investment. An 80 percent occupancy is estimated. The income tax rate is 40 percent. Additional expenses are estimated as follows: Property taxes \$100,000 Insurance 30,000 Depreciation 120,000 Administration & general 130,000 Information system 50,000 Human resources 50,000 Transportation 20,000 Marketing expenses 100,000 Property maintenance 100,000 Utility costs 140,000 The other operated departments’ incomes are estimated as follows:

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Unformatted text preview: Food & Beverage \$40,000 Telephone 10,000 Rooms department direct expenses are \$8 per room sold. Requirements: 1. Calculate required ADR using the Habbart formula. 2. Assuming a 30 percent double occupancy and a mark-up of 10 percent for the double rate over the single rate, what should be the single and double rates, respectively? Desired Net Income 2,000,000 * .12 = 240,000 Pretax income 240,000/ 1- .4 = 400,000 Interest Exp + 3,000 * .10 * 1 = 300,000 Inc before int tax = 700,000 Dep, ins, pro tax = 250,000 Inc after op exp + = 950,000 Und op exp = 590,000 Req op Dep Inc + = 1,540,000 Less Food Comm = (50,000) Rm Dep Inc = 1,490,000 Rm Dir Exp (100*.8*365) = (29,200 * 8) = 233,600 Rm Revenue = 1,723,600 / 29,200 Req ADR = \$59.03 #2 48x + 102 (x) (1.10) = (59.03) (150) 48x + 112.2x = 8,854.50 160.2x = 8,854.50 x = 8,854.50 / 160.20 = 55.27 single = 60.79 double...
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