1. The Cody Hotel, a proposed 50-room hotel (rooms-only lodging facility), planned to build in mid-Michigan. The owner is concerned about the average daily room rate (ADR), construction costs, borrowing costs, and their impact on profits. He provides you with the following information:

Determine the required ADR to achieve the owner's goal of earning an ROI of 15%. (20 points)

Investment	$800,000
Debt	$1,500,000
ROI	20%
Interest rate	8%
Income tax rate	20%
Property taxes	$100,000
Fire insurances	$30,000
Depreciation	$200,000
Undistributed operating expenses (fixed)	$200,000
Undistributed operating expenses (Variable)	5%	of total room revenue
Management fee	5%	of total room revenue
Rooms department expenses (fixed)	$20,000
Rooms department expenses (Variable)	15%	of total room revenue
Expected paid occupancy	80%