Josh Anderson, a successful entrepreneur in Nashville, Tennessee, is considering a $3,000,000 investment in a 110- room hotel. The project would require an additional $5,000,000 of debt financing to complete the acquisition. Mr. Anderson desires to know the average daily rate during his hotel would have to charge given the following scenario. These details were acquired during some preliminary research. Prepare a MS Excel solution that shows your work and ultimately calculates the necessary average daily rate to satisfy Mr. Andersons investment requirements.

	#1
Desired Return on Investment (ROI) on Mr. Porters Investment	14%
Interest Rate*	8%
Tax Rate	30%
Estimated annual fixed charges	$600,000
Management fees (% of room sales)	3%
Undistributed operating expenses	$1,500,000
F & B profits	$300,000
Telephone/Internet/Movie profits	$10,000
Variable costs per room sold	$10
Occupancy rate	55%

* Use simple annual interest only for determining interest expense on this problem.

Methodology:

This methodology is a bottom-up approach. In determining the average price per room, this approach considers costs, desired profits, and expected rooms sold. In other words, this approach starts with desired profit, adds income taxes, adds fixed charges and management fees, followed by operating overhead expenses and direct operating expenses. It is called bottom-up because the first item, net income (profit), is at the bottom of the income statement. The second item, income taxes, is the next item from the bottom of the income statement, and so on.

Please submit your MS Excel file solution