Vacation Inn Corp. (VIC) has just finished building a 60 room motel. VIC anticipates that they will rent these rooms for a total of 16,425 nights next year (75% of full capacity). All rooms are similar and will rent for the same price. VIC estimates the following operating costs for next year:

Variable operating costs $15 per room night

Fixed costs:

Salaries and wages $177,000

Maintenance $140,000

Admin $ 63,250

Total Fixed Costs $380,250

The capital invested in the motel is $2 million. VICs target return on investment (ROI) is 20%. VIC expects demand for rooms to be about uniform throughout the year. VIC plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment.

1) What price should VIC charge per room per room night to achieve the target return on investment? (round to two decimals)

2) Continuing with the data in above, VIC thinks that if the price per room night determined in 1) were reduced by 10% the expected room-nights rented would increase by 10%. What would the income be if VIC charged the new price? (round to the nearest dollar)