Serial Case C12-63 (Managerial accounting fifth edition)

This case is in continuation of the caesar's cooperation entertainment serial case that began in chapter 1. Refer to the introductory story in chapter one (see page 43) for additional background.

Hotel Room Night to be budgeted to be booked in 2016 = 587 * Average occupancy rate 91.20% * 366=195936

Budgeted Revenue = # of hotel room night 195936 * hotel room rate per night $149 =$29,194,464.00

Budgeted Variable Cost = # of room night 195936 * variable costroom night $27 =$5,290,272.00

Budgeted Net Revenue =$29,194,464.00 Less Budgeted Variable Cost $5,290.272.00 Contribution Margin $23,904,192.00 Less Fixed Cost $2,390,000.00 Budgeted Net Income = $21,514,192.00

1. In number of years, what is the payback period of the renovation? Ignore the maintenance costs in the seventh and twelfth years for the purpose of the payback calculation. 2. What is the net present value (NPV) of this investment? Assume an interest rate of 10%. 3. What qualitative factors did Caesarss management likely consider when making the decision to renovate the hotel?