BREAKEVEN ANALYSISHomework
1. Hotel Skyviews has the following information:
Selling Price = $200 per night
Total number of rooms= 30
Variable Costs = $40
Total Fixed Costs = $60,000 per month
September 30 days
Calculate:
A. How many roomnights does the
Club owner borrows $200,000 from a bank, interest expense of $20,000 per year.
He raises another $200,000 of equity from an investor and agrees to give him a
50% ownership portion in her restaurant.
Projected cash flow is $100,000 before debt service
What
Ch 6 Financing Growth
WACC calculation
Total fund need
$
200,000.00
Debt
Amount financed by
Weight of debt, wd
70%
$
Cost of debt, Kd = interest rate
Equity
Weight of equity, we
140,000.00
10%
30%
$
Cost of equity (ROI), ke
20%
$
Tax rate of business, T
T
ACME Restaurant
Balance Sheet
As of December 31, 2014
Current Assets
Cash
Accounts Recievable
Notes Recievable
Inventory
Prepaid Insurance
Accured Interest Recievable
Total Current Assets
$10,220
$11,620
$25,000
$14,850
$8,000
$3,200
$72,890
Building
Equi
Credit Sales=>Accounts Receivable
Collection of Accounts Receivable
80% collected in next month (+1)
20% collected in two months (+2)
Cash Sales
Total Sales
Credit Purchase, paid next month
Cash Purchases
Payroll, 35% of total sales
Debt Service on Montag
Credit Sales=>Accounts Receivable
Collection of Accounts Receivable
80% collected in next month (+1)
20% collected in two months (+2)
Cash Sales
Total Sales
Credit Purchase, paid next month
Cash Purchases
Payroll, 35% of total sales
Debt Service on Montag
HRTM 105 Finance in Hospitality
Chapter 7 Time Value of Money
Addition of a Spa at a Resort Hotel (p. 217)
Powell Hospitality Ltd. is proposing the redevelopment of the spa at its Whispering Winds Resort.
Currently the spa space is leased to a spa managem
Loan Amortization Schedu
Loan amount
Annual interest rate
Loan period in years
Number of payments per year
Start date of loan
Optional extra payments
Enter values
$ 100,000.00
8.00 %
30
12
1/1/2015
$

Loan summary
733.76
Scheduled payment $
360
Scheduled
Daily payroll cost report
Regular, Overtime, total hours, & Payroll $
Payroll $(cost per room)
Payroll$/# of rooms (*do that for every department)
Room Revenue Forecast
Forecasting is the estimate of how many rooms will have that week
Average rate/Forecas
Total fund need
$
45,000,000.00
Debt
Amount financed by
Weight of debt, wd
55.00%
$
Cost of debt, Kd = interest rate
Tax rate of business, T
Tax effect (1T)
Cost of debt after tax effect, kd *(1T)
Weighted cost of debt
wd * kd * (1T)
Weighted average c
Loan Amortization Schedule
Enter values
Loan summary
Loan amount
Annual interest rate
Loan period in years
Number of payments per year
Start date of loan
Optional extra payments
Scheduled payment
Scheduled number of payments
Actual number of payments
Tota
Cap rate of valuation
Year
Cap rate
Yr 3 cash flow
Market value
10%
$ 750,000.00
$ 7,500,000.00
1
2
3
Compounding Interest Future Value Present Value
Period
Rate
[N]
[I/Y]
[FV]
[CPT][PV]
1
12% $250,000.00
2
12% $500,000.00
3
12%
#
Total Present Value= ($3
65`
WACC calculation
Total fund need
$ 35,000,000.00
Debt
Amount financed by
Weight of debt, wd
Cost of debt, Kd = interest rate
60.00%
$ 21,000,000.00
12.00%
Equity
Weight of equity, we
40.00%
$ 14,000,000.00
Cost of equity (ROI), ke
18.00%
Tax rate of b
Cash flows from operations
Net income
Increase in depreciation
Increase in accounts receivables
Increase in inventory
Increase in prepaid rent
Decrease in accounts payable
Increase in accured payroll
Decrease in accured taxes
Total
$
9,800.00
$850.00
($1,
Year
Spa Occupancy
Spa Service Rendered
Revenue
Spa services
Beauty Services
Health and Fitness Services
Other Revenue
Total Spa Revenue
Cost of Good Sold
Payroll
Operating Expenses
Gross Operating Income
Discount rate
Period, N
Present value
Total Net Pr
Efren is considering buying some new equipment for his restaurant for $30,000.
However, the restaurant supply store says they also lease equipment. The supply
store will offer him a fiveyear lease with no down payment, four annual lease
payments of $6,00
Milton is offering Bernard an opportunity to invest in his deal. He is asking for an equity
investment of $125,000 and promises to pay Bernard the following cash flow:
Bernards hurdle rate is 14%. Does Miltons proposal meet Bernards investment goal?
Year
What is the maximum amount of loan Jose Luis can obtain if
projected cash flows from his proposed project for the next five years
are as follows and the lender is requesting a 12.5% interest rate?
Year
1
2
3
4
5
Cash Flow
5,000
5,800
6,900
9,500
12,650
$
Sam projects cash distribution to his equity investors to be $80,000 per year. He plans to hold his resturant for 5 years, then sell the property.
He estimates that a sale at the end of Year 5 will bring in $2.5 million. He knows his investors are expecti
Tanya is trying to prepare her loan amortization schedule for the renovation of her bedandbreakfast facility. Her banker is
quoting her an interest rate of 12% for four years. The loan amount is $25,000.
Q.1) Prepare the loan amortization schedule.
Q2)W
Year
Cash flow
0
1
2
3
4
5
130,000
10,000
12,500
14,000
18,500
181250 => 21,250 + sale value of $160,000
Rate=
15%=
NPV= $ (1,956.61)
$
(1,956.61)
0.15
Meaning that cash flow is
1,956.61 short of justifying the
$130,000
Rate=
13%= 0.13
NPV= $ 8,063.23 Me
What is the maximum amount of loan David can obtain if projected cash flows from his
proposed project for the next six years are as follows and the lender is requesting a
14% interest rate?
Year
1
2
3
4
5
6
Cash Flow
4,000
4,800
6,500
8,000
8,200
13,000
1