Ben and Alex Inn, a proposed 100-room hotel is to be built in downtown Delhi,...
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Ben and Alex Inn, a proposed 100-room hotel is to be built in downtown Delhi, Ny. It will cost $4,400,000 to construct. Of the estimated $4,400,000, Ben and Alex will be investing $2,400,000 and the other $2,000,000 will secured from the Delaware National Bank at a rate of 6%. The owners desire a 15% return on their investment. The projected occupancy rate is 75%. The estimated undistributable expenses not including income taxes and interest total $400,000 plus 5% of the total room revenue. Their income tax rate is 40%. Room department expenses are $400,000 plus 15% of room sales and the management fee is 5% of room sales. Find the required ADR to achieve Ben & Alex's required rate of return of 15%
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