1. A number of SHA graduates from Boston University have thought of a 150 room hotel project and have estimated total construction cost along with working capital and pre-opening expenses forecasted as follows: construction cost ($22 million), working capital ($400,000), and Pre-opening expenses ($1,600,000). Pre-opening expenses will be amortized over 8 years. Very fortunately, SHA Associates acquired a loan of $10 million from BU credit union at the never-heard of favorable rate of 7.0% and another loan of $6 million from Richy Bank at 9%. And finally the third loan of $2 million was just approved by Cheapy Bank at 11%. The SHA Associates forecasts to have an occupancy of 75 percent for their hotel next year. Rooms department's direct operating expenses (wages, supplies, laundry, and so on) are estimated to have 25% of rooms revenue. And other various expenses information are estimated as follows: Construction cost schedule Land Building (Life years: 25) F.F & E (Life years: 5)(Salvage Value: $50,000) $ 3,000,000 16,000,000 3,000,000 Other costs information Administrative and General (2% of Rooms revenue) Marketing and Sales (5% of Rooms revenue) Energy Costs (4% of Rooms revenue) Property maintenance and repairs (1% of Rooms revenue) Property taxes Insurance Telephone department's estimated operating loss Operating income from food and beverage dept. 36,000 18,000 20,000 320,000 Income tax rate is 40% The owners expect an after tax return of 20% (ROI) a. Calculate the hotel's average room rate for next year. (4 points) b. If the hotel expects to operate at the sales mix ratio forecasted above in (b) and management wants a $15 spread between the single and double room rates and 50% more over the double room rate for suite, what would these rates be? (4 points)