Bottom-Up Pricing............and yet again! Bryan Bessner has invested $2,000,000 in a small hotel. He would like...

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Bottom-Up Pricing............and yet again! Bryan Bessner has invested $2,000,000 in a small hotel. He would like to see an 8% after-tax return on his investment this year. Bryan faces a personal tax rate of 34%. There are many costs involved in running a hotel. Estimates indicate that variable costs will use up 67% of the revenue earned by the business. Fixed costs for the year would be: Salaries.......... Insurance.. License.......... .$580,000 ...... 90,000 32,000 Utilities..................... 125,000 Also, depreciation on the restaurant building itself would be 10% of the building's 6,000,000 book value. Part of Bryan's investment in the hotel came through a bank loan of $500,000, on which he will be paying 8% interest this year. REQUIRED: a. Please calculate the total amount of revenue that this hotel will need to earn this year, in order to meet all costs and allow for Bryan's expected after-tax profit. b. Assuming that Bryan's hotel has 50 rooms, please find the average room rate that Bryan must charge for the coming year, in order to meet his profit goals. Remember that a hotel will stay open for all 365 nights of the year! Bottom-Up Pricing............and yet again! Bryan Bessner has invested $2,000,000 in a small hotel. He would like to see an 8% after-tax return on his investment this year. Bryan faces a personal tax rate of 34%. There are many costs involved in running a hotel. Estimates indicate that variable costs will use up 67% of the revenue earned by the business. Fixed costs for the year would be: Salaries.......... Insurance.. License.......... .$580,000 ...... 90,000 32,000 Utilities..................... 125,000 Also, depreciation on the restaurant building itself would be 10% of the building's 6,000,000 book value. Part of Bryan's investment in the hotel came through a bank loan of $500,000, on which he will be paying 8% interest this year. REQUIRED: a. Please calculate the total amount of revenue that this hotel will need to earn this year, in order to meet all costs and allow for Bryan's expected after-tax profit. b. Assuming that Bryan's hotel has 50 rooms, please find the average room rate that Bryan must charge for the coming year, in order to meet his profit goals. Remember that a hotel will stay open for all 365 nights of the year!