Disney Hotel is considering purchasing an existing hotel in the entertainment district. The hotel will require Disney to invest $2 million to purchase the hotel. The hotel will be straight line depreciated over 20 years. At full capacity, the hotel has 100 rooms and can rent up to 36,500 room nights per year. Operating costs are as follows: Variable cost per room per night: $20 Fixed costs per year (excluding depreciation): $525,000 Disney requires an annual income that represents a return of 20% on the initial investment.

1. How many rooms will need to be booker per night and per year in order to make the desired income? 2. What qualitative issues should be considered?