Problem 1. You currently manage Seacrest Hotel. It has 150 rooms and you expect an occupancy of 65%. Your hotel only sells two sizes of rooms, 65% are Kings and the rest are Queens. A King size room will have a $20 higher rate than that of Queen. Please review your financial figures below and determine your room rates below:

1) Average daily rate 2) Rate for King size room 3) Rate for Queen size room

Owner's investment $6,000,000 Target ROI 25% Tax rate 20% Loan $4,000,000 Interest 15% per year

FORECASTED ANNUAL COSTS Other fixed (without the interest) $675,000 Labor expenses 5% of room sales Rooms dept. expenses (consider as fixed in a year) $15 per room sold + $150,000 per year Operating expenses $300,000 + 4% of room sales INCOME FROM OTHER SOURCES Food and Beverage outlets $100,000 annual profit Rent collected from meeting rooms $6,000 annual profit