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Janice Long is considering building a budget hotel that offers clean small rooms with bathrooms. She anticipates that her 120 rooms will rent for 39,600

Janice Long is considering building a budget hotel that offers clean small rooms with bathrooms. She anticipates that her 120 rooms will rent for 39,600 room-nights per year. The market price for equivalent rooms is $60 per night. Janice estimates that the capital cost will be $6,500,000 and she would like an annual return of 10%. Following are the estimated annual operating costs:

Variable operating costs$ 21 per room night

Fixed costs:

Salaries and wages$ 420,000

Building maintenance89,000

General administration

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