2. What are the total sa following information: Land Michigan. Jeremy Harris, the owner, is concerned about the average daily room rate (ADR), The proposed Harris Place (a fifty-room, rooms-only lodging facility) is to be built in mid- construction costs, borrowing costs, and their impact on profits. He provides you with the Problem 12 1. Proposed costs of the lodging facility: $400,000 $2,000,000 Building Equipment $1,000,000 2. Financing: Equity (desired return on investment) (ROI = 15 percent) $1,000,000 Debt (8 percent annual interest rate) $2,400,000 3. Income tax rate: 40 percent 4. Property taxes: $120,000 per year 5. Fire insurance: $30,000 (annual premium) 6. Depreciation: Building: 40-year life, straight-line method, $0 salvage value Equipment: 10-year life, straight-line method, $0 salvage value 7. Undistributed operating expenses: $300,000 annually and 5 percent of total room revenue & Management fee: 5 percent of rooms revenue 10. Rooms department expenses equal $30,000 annually plus 15 percent of room sales. 9. The telephone department is expected to just break even. Determine the required ADR to achieve Jeremy Harris's goal of earning an ROI of 15 percent. 11. Expected paid occupancy is 70 percent. Cost Approaches to Pricing 431 Josie's Place Inn, a proposed 30-room motel with a fully equipned room 2. What are the total sa following information: Land Michigan. Jeremy Harris, the owner, is concerned about the average daily room rate (ADR), The proposed Harris Place (a fifty-room, rooms-only lodging facility) is to be built in mid- construction costs, borrowing costs, and their impact on profits. He provides you with the Problem 12 1. Proposed costs of the lodging facility: $400,000 $2,000,000 Building Equipment $1,000,000 2. Financing: Equity (desired return on investment) (ROI = 15 percent) $1,000,000 Debt (8 percent annual interest rate) $2,400,000 3. Income tax rate: 40 percent 4. Property taxes: $120,000 per year 5. Fire insurance: $30,000 (annual premium) 6. Depreciation: Building: 40-year life, straight-line method, $0 salvage value Equipment: 10-year life, straight-line method, $0 salvage value 7. Undistributed operating expenses: $300,000 annually and 5 percent of total room revenue & Management fee: 5 percent of rooms revenue 10. Rooms department expenses equal $30,000 annually plus 15 percent of room sales. 9. The telephone department is expected to just break even. Determine the required ADR to achieve Jeremy Harris's goal of earning an ROI of 15 percent. 11. Expected paid occupancy is 70 percent. Cost Approaches to Pricing 431 Josie's Place Inn, a proposed 30-room motel with a fully equipned room