The owner of the Cast-A-Shadow Inn, Michael Castashadow, decided to hire a management company to run his hotel. The inn currently has 200 guest rooms.

The annual revenue for the next 3 years is projected below:

Year 1 2 3 Room Sales $3,200,000 $3,350,000 $3,550,000 Food & Beverage Sales 1,000,000 1,100,000 1,200,000 Other Sales 150,000 160,000 175,000 Total $4,350,000 $4,610,000 $4,925,000 Income before fixed charges and management fees is expected to be 35% of total revenue each year. Two management companies, Moonwood Resorts and Eastmont Hospitality, have proposed the following fee structures to the owner:
A. Moonwood Resorts:
1. $1,900 per year per guestroom or 2. 3.5% of total sales plus 14% of IAUOE 3. 5% of room sales, 2% of food sales and 20% of IAUOE B. Eastmont Hospitality:
1. 5% of room sales, 2% of food sales, and 20% of LAUOE Which option is best for the owner over the 3-year period?