Question

Average Daily Rate:$125

Number of Rooms 125

Rooms Sold 40,150

Gross Profit Margin 35%

Net Income will grow by 3 % in years 1-5

Risk Free Rate is 2.51%

Loan Assumptions

25 Year Loan

Debt Coverage Ratio 1.5

Interest Rate 6%

Loan amount 70% of Total Value

Q. What is the Price assuming a maximum loan to value of 70% and the bank requires a 1.5 debt coverage ratio?

Answer 1

Average Daily Rate (R)	$125
Number of Rooms 125
Rooms Sold ( s)	40,150
Revenue = R * S	5018750
Gross Profit Margin	35%	3% increment in Net Income
	Year 1	Year 2	Year 3	Year 4	Year 5
NET operating Income	1756563	1809259	1863537	1919443	1977027
For the 5th year,
Net Income	1977027
SO, Revenue= Net Income/ 35%	5648647
Price = Revenue/ s	140.6886

Therefore , price is around $141.