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1. The following information is taken from the 300 room Hill Cliff hotel predicted operations for next year, occupancy is 85%. Courtney Horne the owner
1. The following information is taken from the 300 room Hill Cliff hotel predicted operations for next year, occupancy is 85%. Courtney Horne the owner invested $5.2 million in the hotel and wants a 16% return on her investment. The hotel operates in the 35% tax bracket. The manager Jason Helms, explains that the hotel has to repay two loans. The first is a $2.7 million building mortgage with a 15% interest repayment, and the second is a business development loan for equipment worth $1.1 million at 23% interest. The hotel has calculated depreciation on vehicles valued $150,000 using the straight line method over 5 years. Other expenses to be covered include: Administration of $740,000, Marketing of $620,000, Wages and Salaries of $990,000, Maintenance of $490,000 and other operating expenses of 30% of total expenses. The hotel also generates an income of $350,000 from a coffee shop. Assume the hotel is open for 365 days. The hotel has three types of rooms, suites, deluxe and standard. Of the rooms occupied 40% are standard, 30% are deluxe and the rest are suites. If, the owner wants deluxe rooms to be 30% more than standard and suites to be 25% more than deluxe. Find a) The average room rate for the Hill Cliff Hotel b) What price should the manager charge for each type of room
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