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QUESTION '7: Larry Bett is considering building a budget hotel that offers clean small rooms with bathrooms. He anticipates that his 120 rooms will rent

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QUESTION '7: Larry Bett is considering building a budget hotel that offers clean small rooms with bathrooms. He anticipates that his 120 rooms will rent for 36,000 room-nights per year. The market price for equivalent rooms is $60 per night. Larry estimates that the capital cost will be $7,900,000 and he would like an annual return of 15%. Following are the estimated annual operating costs: Variable operating costs $ 18 per room night Fixed costs: Salaries and wages $ 450,000 Building maintenance 86,000 General administration 230 000 Total xed costs $ 766,000 Required: a. What is the full cost per room-night? b. Can Larry meet the targeted return on investment based on the estimated costs and revenue? Show your calculations. 0. A tour operator has offered $30 per night for 20 rooms during a time of the year that there is likely to be at least that many rooms vacant. Should Larry accept this offer

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