An investor recently bought a hotel for 700,000 and then spent a further 800,000 on renovations, fixtures, fittings and equipment. The hotel has 60 double-bedded rooms, a bar restaurant, and a leisure facility free for hotel guests. The investor estimates the costs of operating the hotel over a year as follows: Business rates 160,000 25,000 60,000 Maintenance and repairs Depreciation of fixtures, fittings and equipment Salaries - assistant managers, bar/restaurant and facility managers Wages-full-time staff Electricity and utilities (includes average variable cost of 1 per guest per night) Administration (includes average variable cost of 2 per guest per night) Advertising Part-time reception, bar, kitchen and housekeeping staff (average variable cost per guest per night) Other costs (average variable cost per guest per night) 150,000 140,000 67,000 114,000 40,000 5 1 Rooms are let on a half-board basis and the average variable cost per meal served is: m Breakfast Dinner 00 Required: 1. Determine the maximum possible number of guest nights' that the hotel can accommodate a. per night, b. per week, and C. per year (assume a 50-week year and twin-bedded occupation). 2. Identify which costs of operating the hotel you would recognize as: a. fixed costs b. variable costs C. semi variable costs. 3. Determine the total fixed costs of operating the hotel for a period of one year. For your calculation use number of guests as calculated in question 1 (c) 4. Determine the variable cost per 'guest night'. 5. Calculate the number of days before the investor reach the point of break-even. 6. Assume that during the year, the hotel averaged 70% guest capacity and that a fixed room rate at 45 per guest was charged. How much profit in total did the hotel make over a full year? 7. Assume that the investor is running the hotel in 5 years and with the exact same result every year as calculated in question (6). After this period, the investor sells the hotel for 1,600,000. Using an interest rate of 5% p.a., calculate a. The projects NPV b. The actual interest rate of the project