Cost of capital is the opportunity cost

Assignment Help Business Economics
Reference no: EM133126173

In early 2008, you purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession would kill the demand for conventions. Now, you forecast that you will be able to sell only 10,000 room-nights, which cost $60 per room per night to service. You spent $30.00 million on the hotel in 2008, and your cost of capital is 20%. The current going price to sell the hotel is $25 million.

If the estimated demand is 10,000 room-nights, the break-even price is ______ per room, per night. (Hint: Remember that the cost of capital is the opportunity cost, or true cost, of making an investment.)

Reference no: EM133126173

Questions Cloud

Statement of financial position for abc company : What is the most likely reason that the Statement of Financial Position for ABC Company is reporting more shares issued than are currently outstanding?
Artificial system and natural system of classification : What is the difference between an artificial system of classification and a natural system of classification? Which do we use today? Explain our current taxonom
Major impact on the canadian retail sector : The current pandemic had a major impact on the Canadian retail sector, effectively leading to major layoffs of retail workers. Now, many of those laid off worke
Manage with external organizations and institutions : Discuss in detail the major dilemmas that community development organizations must manage with external organizations and institutions.
Cost of capital is the opportunity cost : In early 2008, you purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that t
Learning about economics and personal finance : How would learning about economics and personal finance help you navigate your career or operate a business
How would learning about economics and personal finance : How would learning about economics and personal finance help you navigate your career or operate a business
What is the importance of managerial economics : 1. What is the importance of managerial economics?
Prepare an instalment payment schedule for the note : On January 1, 2021, Oriole Corp. borrows $16,800 by signing a 3-year, 6% note payable. Prepare an instalment payment schedule for the note

Reviews

Write a Review

Business Economics Questions & Answers

  What are the values of private saving

Assume that GDP (YCCYTrIIrrTG ) is 6,000. Consumption () is given by the equation = 600 + 0.6( - ) - 100. Investment

  Equations describe its demand-marginal revenue-total cost

Suppose that only one firm produces and sells soccer balls in the world. The following equations describe its demand, marginal revenue, total cost, and marginal cost curves: How many soccer balls does the monopolist produce? At what price are they so..

  Compare these proceeds to what you would realize

Compare these proceeds to what you would realize if you simply continued to hold the shares.

  Firms competing in perfect competition markets

Comment on the impact on the market and economic agents for firms competing in perfect competition markets and less-than-perfect competition markets.

  What are total costs

If Average Total Costs are 16.83 at 6 units of output, what are Total Costs?

  Company take in the stock for delta neutrality

bank has just sold a call option on 500,000 shares of a stock. The strike price is 40; the stock price is 40; the risk-free rate is 5%; the volatility is 30%.

  The long run natural rate of unemployment

The long run natural rate of unemployment is 5%. The current rate of unemployment is 3% what do we expect to happen if no policy is used. If no policy is used in the long run we would expect the CPI to [increase, decrease, stay the same]

  Equilibrium choice of leisure and consumption

a) Draw Steve's initial budget constraint, and show his equilibrium choice of leisure and consumption. Make sure everything is labelled.

  Explain the output employment wage and income distributional

Using the diagram below explain the output, employment, wage, and income distributional consequences of an increase in migration of labour = L1US - L2US from Mexico to the USA.

  Current value dropping below its original purchase price

Why, however, is it illogical to dismiss the possibility of a home's current value dropping below its original purchase price?

  What is the price elasticity of supply for good

When the price of Good X increases by 1.3%, the quantity of Good X supplied increases by 5.7%. What is the price elasticity of supply for Good X equal to?

  Trend value of the real interest rate

"Equilibrium in the money market under a constant money growth rule implies a nominal interest rate that is equal to the trend value of the real interest rate".

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd