Ron Checky has just won the state lottery and is considering investing his winnings in a hotel and hiring a management company to operate the prop- erty. He expects room revenues to be $9,000,000 in year 2004 with an expected increase of 6% per year. Additional revenue of $4,000,000 per year is expected from food and beverage and fees from the hotel’s executive golf course. These revenues are expected to grow by 8% per year. IAUOE is expected to be 38% of total annual revenue.

Which of the following two management contract proposals would be most advantageous to Mr. Checky over the course of the next 3 years?

A. 3% of total revenue plus 10% of IAUOE.

B. $35,000/month plus 8% of IAUOE.