The Lodge, a proposed 150-room hotel with a fully equipped restaurant, will cost $5,900,000 to construct.An estimated
Question:
The Lodge, a proposed 150-room hotel with a fully equipped restaurant, will cost $5,900,000 to construct.An estimated additional $100,000 will be invested in the business as working capital.Of the total investment, $4,500,000 is to be secured from the Bank at a rate of 10% interest and the remainder will be equity provided by the owners.The projected occupancy rate is 68% for the year.The owners desire a 15% return on equity after the corporation pays income taxes of 25%.The estimated depreciation expenses for the first year of operation are $100,000. The estimated undistributed expenses, not including income taxes and interest expense, are $805,400.The estimated direct expenses of the rooms department
are $20 for each room sold.Consider a year to have 365 days.
What is the required net income?