Owners of a motel chain are considering a new investment. The cost of the 125-unit motel (excluding furnishings) is $10 million and the furnishings, which cost $2 million must be replaced every five years (with no salvage value). The annual O&M costs are $200,000 per year, the average daily room rate is $110/day (increasing by 3% per year), and the buildings will be sold in 15 years for 20% of the original building cost. Ignoring taxes, if the motel operates 365 days/year, what is the required occupancy rate if the motel chain needs to make a return of 10% per year on its investment (use end-of-year convention)?

please show all the steps

Government is considering building a public park in a small town ìBelleî. The cost of building this park is 120. There are three people in this town, Arnold, Ben, and Carrol. Each personís valuation of the park is 20, 30, and 80 respectively. But, government does not know these valuations.

(a) The government decides whether to build this park by majority voting. If majority supports building the park, then cost will be equally shared. What will be the outcome of majority voting?

(b) Government suggests that the cost of building the park will be financed through the government revenue in other towns. But government will only take this project when the benefit is higher than the cost. Government want survey these three to know the benefit of the park. Do you think this is the right plan to get the benefit of the park? Explain why or why not.

(c) Government suggests another plan. Government will survey these three to get the valuation of the park. If the sum of benefit is greater than the cost, cost will proportionately shared among three according to the reported valuation. For example, the reported valuation is 50, 60, and 70, then each cost share will be 50/(50+60+70), 60/(50+60+70), and 70/(50+60+70). Do you think this is the right plan to get the true valuation? Explain why or why not.

Quantitative Methods in BUSN

Solve this problem using Excel Solver

1. Devos Inc. is building a hotel. It will have 4 kinds of rooms: suites where customers can smoke, suites that are non-smoking, budget rooms where the customers can smoke, and budget rooms that are non-smoking. When we build the hotel, we need to plan for how many rooms of each type we should have. The following are requirements for the hotel:

1. We want to figure out how many rooms of each type to build based on maximizing revenue if we fill up the hotel. We expect to charge $190 for a suite that is non-smoking and $140 for a budget room that is non-smoking. Smoking room customers for both suites and budget rooms will have to pay an additional $20 per night.
2. We can spend up to $7,500,000 on construction of our hotel. The cost to build a non-smoking budget room is $12,000. The cost to build a non-smoking suite is $15,000. It is $3,000 additional for a smoking room of either type for smoke detectors and sprinklers.
3. We require that the number of budget rooms be at least 1.5 times the number of suites, but no more than 3 the number of suites.
4. There needs to be at least 80 suites, but no more than 200.
5. Industry trends recommend that smoking rooms should be less than 50% of the non-smoking room and in addition, we require our builder gives us at least 4 smoking rooms.

Answer the following using your Solver answers:

1. How many of each room type should be built, and what would the revenue be for a night when our hotel was fully booked?
2. Without re-running Solver, what happens to our revenue if we get an additional $1,500,000 for building? Explain in words how you got this answer without re-running solver. Over what amount of construction costs can you use this procedure?
3. Over what range of room price can our budget non-smoking rooms vary over for us to get the same answer for the quantity of each type of room?

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $32,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.

Instructions (a) Determine the number of rentals and the sales revenue Jane needs to break even using the contribution margin technique.

(b) If the current level of rentals is 3,500, by what percentage can rentals decrease before Jane has to worry about having a net loss?

(c) Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she can increase the room rate to $66 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an
annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night
including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.

Instructions:

1. Determine the number of rentals and the sales revenue Jane needs to break even using the contribution margin technique.

2. If the current level of rentals is 4,000, by what percentage can rentals decrease before Jane has to worry about having a net loss?

3. Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she
can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Q1) Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,600 per year. The rooms rent at an average price of $127 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.6 per person per night and the cost of food which is $5.8 per person per night.

A) Determine the sales revenue Jane needs to break even.

B) Determine the number of rentals Jane needs to earn a target net income of $50,000.

C) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,080. Determine the number of rentals Jane needs to break even if the changes are made.

D) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,700 per year. The rooms rent at an average price of $128 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.7 per person per night and the cost of food which is $5.1 per person per night.

A) Determine the sales revenue Jane needs to break even.

B) Determine the number of rentals Jane needs to earn a target net income of $50,000.

C) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,010. Determine the number of rentals Jane needs to break even if the changes are made.

D) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)

Amy Richardson had been a well-paid sales manager of a major hotel chain for 15 years. Due to a hotel owner's illness, Amy was offered the opportunity to purchase a hotel near a seaside vacation area she had often visited. After obtaining a lawyer and a financial accountant to assist her, Amy did an analysis of the most recent financial statements of the hotel. Since the hotel had consistently shown a profit during the past few years, Amy thought that the price of the hotel was reasonable, so she decided to purchase the hotel. She resigned her position, obtained a loan, and purchased the hotel.

During the first year as a hotel manager, Amy received an offer from a tour operator who proposed to guarantee a considerable number of room reservations, including during the off-season. However, she turned down the offer because the tour operator asked for a 20% price reduction compared to the regular room rate. A few weeks later, she decided to shut down the restaurant, located in the main building of the hotel, in order to save expenses. With regard to general expenses, she was particularly concerned with the high room cleaning and service costs. On the sales side, although the reservations for the cheaper standard rooms were a bit sluggish, the more expensive large-size superior rooms had a very good occupancy rate of over 90%.

The following year, there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mold situation in the hotel building that required expensive repair work. Amy ran short of cash, became emotionally distraught, and eventually had to sell the hotel at a significant loss.

Question: Using Relevant Costs To Make Short-Term Decisions explain potential management errors that Amy had made and could have helped her to improve decision-making and the financial results of the business.

The lease of Theme Park, Inc., is about to expire. Management must decide whether to renew the lease for another 10 years or to relocate near the site of a proposed motel. The town planning board is currently debating the merits of granting approval to the motel. A consultant has estimated the net present value of Theme Park’s two alternatives under each state of nature as shown below. Suppose that the management of Theme Park, Inc., has decided that there is a 0.21 probability that the motel’s application will be approved.

a-1.
If management uses maximum expected monetary value as the decision criterion, calculate expected monetary value for the alternatives "Renew" and "Relocate"? (Omit the "$" sign in your response.)

a-2. Which alternative should it choose?

• Renew lease??

• Relocate??

c. If management has been offered the option of a temporary lease while the town planning board considers the motel’s application, would you advise management to sign the lease? The lease will cost $21,000. (Omit the "$" sign in your response.)

Yes  because the cost is less  than EVPI of $ ??? .