Accounting

Part IV. Pricing (30 points) A proposed hotel, Green & White, is scheduled to open in one year. The business will be organized as a sole proprietorship. The owner, Kim seeks your advice on pricing. Although she knows she will have to modify your recommendations based on market prices, she desires a cost perspective. She gives you the following information: Kim's investment =$5,000,000 Kim's desired ROI =25% Kim's average tax rate =25% Funds borrowed =$4,000,000 Interest rate =10% annual Forecasted annual costs: Fixed charges (other than interest expense and property taxes) =$600,000 Property taxes =$200,000 Management fees =3% of room sales and $100,000 per year Rooms department expenses =10% of room sales and $100,000 per year Undistributed operating expenses =$300,000 Other prot center's activities: Telecommunications =$50,000 annual PM Food and beverage =$10,000 annual log Assume Spartan has 150 guest rooms and it expects to have paid occupancy of 70%. Reguired: 1. Determine the required ADR (20 points) 2. Assume Spartan has three types of rooms as follows: (10 Points) Singles, doubles, and kings. The kings are priced at $20 more than the double and the doubles are 15% higher than the singles. Forty percent of the rooms sold are doubles and 40 % sold are singles, 20% sold are king. What is the average price of a single, a double, and a king