Question: In early 2008 you purchased and remodeled a 120 room
In early 2008, you purchased and remodeled a 120 room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession would kill the demand for conventions. Now, you forecast that you will only be able to sell 20,000 room-nights that cost on average $50 per room per night to service. You spent $20 million on the hotel in 2008, and your cost of capital is 10%. The current going price to sell the hotel is $15million. What is your breakeven price?
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