Reference no: EM1359882

Goran Blomberg is interested in investing in a new rooms-only lodging property. He needs some financial projections for the proposed operations. He provides the following:

1. Room sales
Average room rate $50
Average daily occupancy 65%
Average rooms per day 50

2. Fixed labor- $12000/month

3. Other fixed expenses
Depreciation $5000/month
utilities $3000/month
Insurance $1000/month
Other $3000/month

4. Variable labor- 15%

5. Other variable expenses
Other room expenses 5%
Administration 4%
Marketing 5%
Utilities 3%
Other 8%
6. Income tax rate- 20%

Q.
1. Determine the projected net income using the above information. Assume the property will be open 365 days a year.
2. Determine the projected net income if the room rate is increased to $55.
3. Independent of #2, determine the projected net income if the room rate is increased to $60 and variable labor is %18.