#10

Dustin Gordon, the executive vice president of COB, is considering expanding the company's operations into the hospitality industry. The company's goals include diversification, but also require an 18 percent return on their investment after taxes. Mr. Gordon has studied a hotel property that yields the following results: 1.The rooms department generates 80 percent of the sales and operates with a CMR of .76. 2.The food and beverage department generates the other 20 percent of sales, and has a CMR of .55. 3. Fixed costs per year are estimated to be $240,000. 4.In order to purchase the hotel, COB would have to invest $1,500,000. 5. COB's tax rate is 30 percent. What level of sales is required before Mr. Gordon would recommend investing the hotel to COB's board of directors