Formulate the outline of a precision pricing policy for a four-star hotel designed to accommodate business guests as well as tourists from all over the world. Explain your answer

Pleasanton Studios Kersten Brown, the CEO of Pleasanton Studios, is having a tough week – all three of her top management level employees have dropped in with problems. One executive is making questionable decisions, another is threatening to quit, and the third is reporting losses (again). Kersten is hoping to find simple answers to all her difficulties. She is asking you (her accountant) for some advice on how to proceed. Pleasanton Studios owns and operates three decentralized divisions: Entertainment, Streaming, and Parks. Pleasanton Studios has a decentralized organizational structure, where each division is run as an investment center. Division managers meet with the CEO at least once annually to review their performance, where each division manager’s performance is measured by their division’s return on investment (ROI). The division manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital. The Entertainment division manager, John Freeman, was the first to knock on Kersten’s door this morning. Entertainment, Pleasanton Studios’ first endeavor, produces movies for the big screen. Entertainment has been in operation since 1965. Last month, John had mentioned a proposal to build a new animation studio. The build would cost $4,910,000 with an estimated life of 20 years and no salvage value and would allow Entertainment to start producing animated movies. Animated movies were projected to bring in an additional $1,210,000 in revenues each year, but would increase annual production costs by $574,000. John had dropped in to let Kersten know he had decided not to move forward with the animation studio. This surprised Kersten – her quick mental calculation indicated that the studio would have a payback period of 8 years, much shorter than the expected life of the studio. Not entirely sure that her quick assessment was valid, Kersten needed to check with her accountant on the matter. Next to Kersten’s door was the manager of Streaming, which produces short-form (30 minute to one hour) episodes in addition to streaming the movies developed by Entertainment. Customers then buy subscriptions to the service. Run by division manager Reyna Imanah, Streaming was introduced in 2016 and has increased subscriptions by 20% every year since. Reyna’s complaint was that, based on the current bonus payout schedule, John Freeman’s bonus last year was significantly higher than hers. She points to the increasing subscription rates at Streaming, and says that her division is being punished for having opened so recently (her division’s facilities are much more recent than those in Entertainment). She currently has an employment offer from another company at the same base pay rate, and stated that she will accept this offer unless she feels her performance is being appropriately acknowledged and compensated. Kersten needs to look at the relative performance across divisions to determine how to proceed with Reyna. Pleasanton Parks is a theme park based on the movies from Entertainment and the series from Streaming. For many years, it was a popular year-round destination, with characters, rides, and a hotel. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to permanently close that division. Included in the ‘Fixed COGS’ for Parks is an annual $1,650,000 mortgage payment on the land and buildings for the park, which would still need to be paid (as a corporate level cost) if the park is closed and that segment is removed from the financial statements. Incidentally, you recently had a conversation with a Marriott Hotels executive, who would like to expand into the area. If you decided to close Parks, you are fairly certain that you could lease the hotel facilities to Marriott for $650,000 annually. A partial report of this year’s financial results for Pleasanton Studios can be found in Table 1 below. The ‘Selling and admin costs’ listed in Table 1 are directly incurred by each division, and are determined at the beginning of each year (that is, they do not change with increased/decreased production). In addition to the divisional information above, there are $2,000,000 in corporate costs that are currently allocated evenly between the three divisions. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Parks division is closed, the decreased employee base would reduce allocated corporate costs by $500,000. Pleasanton Studios has a cost of capital of 12 percent (and Kersten uses the cost of capital as their required rate of return) and are subject to 32% income taxes. Before she can make any decisions, Kersten needs to evaluate this year’s performance results. She sets off to see you, the company’s accountant, for answers.

Required: Write your response in the form of a 1-2 page memo to Kersten Brown, from the perspective of the company accountant. Be sure to include all the financial analyses to support your conclusions, clearly showing your calculations, at the end of the memo or attached in a separate document. Be sure to address the following points in your memo.

a. Evaluate this year’s performance results for the three divisions. Your financial analysis should include a segmented income statement for Pleasanton Studios, as well as the current annual ROI, residual income and EVA for the three divisions.

b. Evaluate Entertainment’s decision not to invest in the new animation studio (i.e., was the decision appropriate and in the best interests of Pleasanton Studios), including the appropriate financial analyses to support your evaluation.

c. Evaluate the validity of Reyna Imanah’s complaint regarding her evaluated performance. Explain why it is (or is not valid), and what further information would be necessary.

d. Provide a recommendation on whether to close the Parks division, including all necessary financial analyses.

Isolation Company has debt-equity ratio of 0.7. Return on Assets is 9% and total equity is 511,312. What is the Net Income

If n = 540 and ˆpp^ (p-hat) = 0.7, construct a 90% confidence interval.

Give your answers to three decimals

_______ < p < ____

A rectangular swimming pool is to be built with an area of 1800 square feet. The owner wants 5-foot-wide decks on either side and 10-foot-wide decks at the two ends. Find the area (in sq. feet) of the smallest piece of property on which the pool can be built satisfying these conditions.

          Given: xy=1800

3. Only using the runif function with default settings, generate:

(a) n = 1e4 iid realizations from a Bernoulli distribution with probability of success parameter, θ = 0.7.

(b) n = 1e4 iid realizations from a Binomial distribution with probability of success parameter, θ = 0.7 and number of trials= 20.

(c) n = 1e4 iid realizations from an Exponential distribution with mean µ = 7 (hint: if X ~ Exp(µ) then Var(X) = µ² ).

For each case comment on the sample mean and sample variance of these realizations and if match what you expect.

1. Let X and Y be independent U[0, 1] random variables, so that the point (X, Y) is uniformly distributed in the unit square.

Let T = X + Y.

(a) Find P( 2Y < X ).

(b). Find the CDF F(t) of T (for all real numbers t).

HINT: For any number t, F(t) = P ( X <= t) is just the area of a part of the unit square.

(c). Find the density f(t).

REMARK: For a number t and a small dt, f(t) dt is the approximate probability that T lands in the interval [t, t+ dt ]. For example, f(0.7) *(0.01) is the approximate probability that T is between 0.7 and 0.71 . Where does (X,Y) have to land for T to be between 0.7 and 0.71 ? Now consider how the probability that T lands in [t, t + 0.01 ] changes as t increases, first from 0 to 1 and then from 1 to 2. Compare with your answer to (c).

Your friend tells you that the proportion of active Major League Baseball players who have a batting average greater than .300 is less than 0.8, a claim you would like to test. The hypotheses for this test are Null Hypothesis: p ≥ 0.8, Alternative Hypothesis: p < 0.8. If you randomly sample 20 players and determine that 13 of them have a batting average higher than .300, what is the test statistic and p-value?

A 335-room hotel property recorded in 2004 a 66.6% occupancy and an ADR of $117.98. What is the property’s franchise fee (1) on a per available room basis and (2) as a percentage of rooms revenue if the agreement required the hotel to pay a reservation fee of $7.65 per available room per month; a royalty fee of 5% of rooms revenue; an advertising fee of 2.3% of rooms revenue; and a frequent traveler program fee of $5.00 per occupied room. The hotel had frequent stay guests totaling 6% of the occupied rooms. The initial fee is a minimum of $45,000 plus $300 per room for each room over 150.

1. Please use the information from Question 1 to calculate the Total franchise fee.

              Total franchise fee (round to a whole number) $ ___

2. Please use the information from Question 1 to calculate the Franchise fee on PAR basis.

             Franchise fee on PAR basis (round to two decimal places) $___ PAR/yea

3.Please use the information from Question 1 to calculate the Franchise fee as a % of revenue.

             Franchise fee as a % of revenue (round to two decimal places) ___%