Your third client at Aeon Insights (after Mike and Maggie): Suppose a Concordia alumni Michaela Dyer,...
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Your third client at Aeon Insights (after Mike and Maggie): Suppose a Concordia alumni Michaela Dyer, who has been working as an economist at the Bank of Canada for the past 20 years, is seriously considering a change in career. She wants to be her own boss and would not mind quitting her job that pays her $200,000 a year for each of the next four years. She came across a motel up for sale with an asking price of $550,000. The motel has two floors and a total of 30 rooms. There are 11 standard rooms on the first floor and 19 luxury rooms-with-a-view on the second floor. You estimated that the rooms are likely to be rented out 300 days out of a year. You also estimated that the daily MC of maintaining a rented standard room to be $20 but $30 for a rented luxury room. For simplicity, MC is constant and therefore MC is the same as AVC. There is no MC or AVC associated with unrented rooms. The annual fixed cost of running the motel is $240,000 per year, such as property tax, security systems and insurance. You recommend some one-time renovations for the motel before the grand opening and the renovation cost is $100,000. On December 31st of the fourth year, if Michaela wants to retire, you expect the motel can be sold for $600,000. The discount rate, which is the average stock market rate of return, is 7%. Keep all calculations to 4 decimal places, if applicable. You also estimated the demand for rooms as below: P 210 Pluxury P = 210 - 5Q Pstandard 30 Qluxury Qstandard 20 Q (rooms per day) For each of the 300 days, you predict that Michaela can rent out luxury rooms and standard rooms. a. 15;9 b. 19; 11 C. 18; 10 O d. 16; 8 The total discounted profit from renting out the rooms over the four years is equal to a. $1,341,335.6575 b. $2,154,266.3591 c. $1,480,373.8318 Od. $1,198,086.2708 Suppose Michaela is not too sure about the resale price after four years. After all, no one knows what the market conditions would be in four years. You want to convince her that the resale price of $600,000 is not necessary in order for this business venture to be desirable. You tell her that as long as the resale value is or higher on December 31st in year 4 (before discounting), she should go ahead with this adventure. a. $14,865.9447 b. $0 c. $13,893.4063 Od. $18,211.4215 Your third client at Aeon Insights (after Mike and Maggie): Suppose a Concordia alumni Michaela Dyer, who has been working as an economist at the Bank of Canada for the past 20 years, is seriously considering a change in career. She wants to be her own boss and would not mind quitting her job that pays her $200,000 a year for each of the next four years. She came across a motel up for sale with an asking price of $550,000. The motel has two floors and a total of 30 rooms. There are 11 standard rooms on the first floor and 19 luxury rooms-with-a-view on the second floor. You estimated that the rooms are likely to be rented out 300 days out of a year. You also estimated that the daily MC of maintaining a rented standard room to be $20 but $30 for a rented luxury room. For simplicity, MC is constant and therefore MC is the same as AVC. There is no MC or AVC associated with unrented rooms. The annual fixed cost of running the motel is $240,000 per year, such as property tax, security systems and insurance. You recommend some one-time renovations for the motel before the grand opening and the renovation cost is $100,000. On December 31st of the fourth year, if Michaela wants to retire, you expect the motel can be sold for $600,000. The discount rate, which is the average stock market rate of return, is 7%. Keep all calculations to 4 decimal places, if applicable. You also estimated the demand for rooms as below: P 210 Pluxury P = 210 - 5Q Pstandard 30 Qluxury Qstandard 20 Q (rooms per day) For each of the 300 days, you predict that Michaela can rent out luxury rooms and standard rooms. a. 15;9 b. 19; 11 C. 18; 10 O d. 16; 8 The total discounted profit from renting out the rooms over the four years is equal to a. $1,341,335.6575 b. $2,154,266.3591 c. $1,480,373.8318 Od. $1,198,086.2708 Suppose Michaela is not too sure about the resale price after four years. After all, no one knows what the market conditions would be in four years. You want to convince her that the resale price of $600,000 is not necessary in order for this business venture to be desirable. You tell her that as long as the resale value is or higher on December 31st in year 4 (before discounting), she should go ahead with this adventure. a. $14,865.9447 b. $0 c. $13,893.4063 Od. $18,211.4215
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ANSWER 1 Option c is correct For each of the 250 days Michela can rent out 12 luxuru rooms and 7 ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
Posted Date:
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