As a young entrepreneur, you are planning to open a budget hotel with a start-up capital of RM 350,000. The hotel will have single-bed rooms with an expected rate of RM 90 per room. An average room occupancy rate is about 250 per month. Annual operating expenses for which cover administration, utility and maintenance costs are about RM 80,000. The cash flows will be expected to remain unchanged for the next 10 years. It is expected that the before-tax minimum attractive rate of return (MARR) is 15% per year.

(i) What is the required average room occupancy rate per month to just breakeven?   

(ii) What is the new required average room occupancy rate per month to just breakeven, if the annual operating expenses increase by RM 7,500 each year starting from year 2? Assume other factors remain unchanged.

Discussion: Profitability Analysis

A large, downtown hotel allocated all of its restaurant labor costs on the basis of revenue dollars. This hotel had seven restaurant outlets that were vastly different, including banquet, room service, a bar, a 24-hour restaurant, and a fine dining facility. There are obvious differences in the way labor resources are consumed in these various outlets. However, the most glaring example was in the banquet operation. Since banquets were not regularly scheduled events, the banquet manager hired servers as contract laborers. These costs were not included in the restaurant labor pool. Suggest at least two steps the manager should take to ensure that all labor is factored into the profitability analysis. The textbook discusses level 1, 2 and 3 variances. Suggest the variance analysis that would pinpoint the issue with the budget. Provide specific examples.

Exercise 1: Average daily hotel room rate (x) and amount spent on entertainment (y) is given in the following table for different cities. a.       Use these data to develop an estimated regression equation that could be used to predict the amount spent on entertainment for a given average daily hotel room rate. b.       What is the value of sample correlation coefficient? c.       Compute the coefficient of determination. What percentage of the variation in total amount spent on entertinment can be explained by room rate? d) Predict the amount spent on entertainment for a particular city that has a daily room rate of $89. City Room Rate ($) Entertainment ($) Boston 148 161 Denver 96 105 Nashville 91 101 New Orleans 110 142 Phoenix 90 100 San Diego 102 120 San Francisco 136 167 San Jose 90 140 Tampa 82 98

A major cab company in Chicago has computed its mean fare from O'Hare Airport to the Drake Hotel to be

$

28.99

, with a standard deviation of

$

3.79

. Based on this information, complete the following statements about the distribution of the company's fares from O'Hare Airport to the Drake Hotel.

(a) According to Chebyshev's theorem, at least ?56%75%84%89% of the fares lie between 21.41 dollars and 36.57 dollars.

(b) According to Chebyshev's theorem, at least ?56%75%84%89% of the fares lie between 19.515 dollars and 38.465 dollars.

(c) Suppose that the distribution is bell-shaped. According to the empirical rule, approximately ?68%75%95%99.7% of the fares lie between 21.41 dollars and 36.57 dollars.

(d) Suppose that the distribution is bell-shaped. According to the empirical rule, approximately 99.7% of the fares lie between

dollars

and

dollars

.

Listed below are portions of the financial statements for MS Park Inc.  

Complete the following Table for MS Park & provide a brief statement on their short term financial position:

1, 33% of consumers read the ingredients listed on a product's label. For a sample of 265 consumers, what is the probability that between 80 and 103 of them read the ingredients listed on a product's label?

2.

The hotel room rate in New York City is normally distributed with a mean of $294 per night. Assume that the standard deviation is unknown.

If 23% of the New York City hotel room rates are more than $328 per night, what is the variance? (Remember the label.)

3.

The Economic Policy Institute reports that the average entry-level wage for male college graduates is $22.23 per hour and for female college graduates is $18.97 per hour. The standard deviation for male graduates is $3.94 and for female graduates is $3.02. Assume wages are normally distributed.

If 30 female graduates are chosen, find the probability the sample average entry-level wage is at least $19.85

4. Julie visits the local park 90 times, and sees her favorite pigeon 38 times. Let p be the probability that Julie sees the pigeon on any given visit, and assume that whether Julie sees the pigeon on some visit is independent of whether she sees the pigeon on any other visit.

(a) Construct a 90% two-sided confidence interval for p.

(b) Julie believes that there is a 50% chance that she sees the pigeon when she visits the park. Is your interval in part (a) consistent with that belief? Explain your answer.

(c) Test Julie’s claim from part (b) with a hypothesis test. Use a significance level of α = 0.05. Perform the test by comparing a test statistic to a critical value found in the tables in the back of your textbook.

(d) Perform the test in part (c) using a p-value.

1. Future costs associated with a restructuring can only be recognized if they:

Select one:

a. will lead to a legal obligation in the future.

b. will lead to a constructive obligation in the future.

2. A construction company has contracted with a major university to build a new sports complex. The contract calls for two sports arenas to be built in the next three years. The company will receive $24,000,000 for the project and their engineers originally estimated a total cost to construct the two arenas of $20,400,000. The two arenas are scheduled for completion in May of 2007. If an actual cost of $9,200,000 is expended in 2004, and the engineers estimate another $12,800,000 is to be expended to complete construction, how much income is to be recognized under the percentage-of-completion method in 2004?

Select one:

a. $1,163,636

b. $836,364

c. $3,600,000

d. $2,000,000

c. will lead to a constructive and legal obligation in the future.

d. will lead to a provision for restructuring cost

King T'Challa of Wakanda wants to create ten youth centers in and around Oakland, California, to improve the living conditions of Black kids in the area. He is considering two options to go about this project: • Option 1 Build all ten centers now, at a cost of $250,000,000 • Option 2 Build four centers now for $100.000,000, three more after four years at a cost of $90,000,000, and three more eight years from now at a cost of $120,000,000 In either case, each youth center requires $150.000 (adjusted for inflation) to run every year once it is built. You can assume the investment for each youth center is paid in full at the beginning of the year and that operating costs are due at the end of every year starting with year one. If the average expected inflation is 2% and the interest rate is 9%, which option makes the most economic sense?

King T'Challa of Wakanda wants to create ten youth centers in and around Oakland, California, to improve the living conditions of Black kids in the area. He is considering two options to go about this project:

Option 1 Build all ten centers now, at a cost of $250,000,000

Option 2 Build four centers now for $100,000,000, three more after four years at a cost of $90,000,000, and three more eight years from now at a cost of $120,000,000

In either case, each youth center requires $150,000 (adjusted for inflation) to run every year once it is built. You can assume the investment for each youth center is paid in full at the beginning of the year and that operating costs are due at the end of every year starting with year one. If the average expected inflation is 2% and the interest rate is 9%, which option makes the most economic sense?