Question

Lou's investment ($)           $7,890,000
Lou's desired ROI (Net income)           20%
Lou's marginal tax rate           30%
Funds borrowed           $11,835,000
Interest rate           12%

Forecasted annual costs:                      
Depreciation, property taxes and insurance           $3,156,000           
Management fees           5%   of room sales      
Rooms department expenses           25%   of room sales      
Undistributed operating expenses           $1,262,400           

Assume the Bruno has 150 guestrooms, and it expects to have an occupancy rate of 70%. Also, assume a 365-day year in your calculations.

1. How much sales revenue should the motel genereate to cover all the costs and make the desired return?

Answer 1

	Investment	789000
	ROI	20%
	Return On Invetstment	Investment
		ROI
	Return On Invetstment	157800
	Add : Tax 30%	47340
	Return Before Interest & Operating Expenses	205140
Add :	Interest 12%	1420200
	Depreciation , Tax & Insurance	3156000
	Operating Expenses	1262400
	Exp before Mgt Fees & Department Exp i.e 70 %	6043740
	Management Fees 5%	431696
	Room Department Exp 25%	2158479
Answer	Sales Revenue 100%	8633914