Problem $12$

The propased Hamis Flace $($a fifty$-$room, rooms$-$only lodging fadlity$)$ is to be built in midMichigan. Jeremy Harris, the owncr, is eoncemed about the average daily room rate $($ADR$),$ construction costs, borrowing costs, and their impact on profits. He provides you with the following information:

Propoed ousis of the lodging facility:

Land

Building

Equipment

$2$ Financing

Equily $($desired relum on investment$)($ROI $-15$ percent$)$ Debt $88$ pencent annual intersst rate$)$

$])$:$\}$

$[$$$2,000,000$

Income lax rater $40$ percent

$$1,000,000$

$$2,400,000$

Froperly lanes: $$120,000$ per year

Fire insurance: $$30,000($arnual premium$)$

Depreciation:

Building $40-$year life, straight$-$line method, $$0$ salvage value Equipment: $10-$year life, straight$-$line method, so malvago value

Undistributed operaling expenses $$300,000$ annually and $5$ peraent of total room revenue

Management fee: $5$ percent of rooms revenue

The telephone department is expected to just break even.

Rooms department expenses equal $$30,000$ annually plus $15$ percent of room sales.

Expected paid occupancy is $70$ percent.

Please complete the following table $($you can show your work insodsctareceive partial credits$)$

$\backslash$table$[[$Net income,,$