Reference no: EM132468257

Another subsidiary of Acrux Group is Honshu Properties. Honshu operates as a property development business. It mainly owns and operates service apartments in the Asia Pacific region. Unlike Plunkett Hotels and Resorts. the General Manager of Honshu Properties is evaluated as an investment centre. Specihcaly. the general manager of Honshu is rewarded based on its pre-tax return on assets (ROA). Thus. the higher its pretax ROA. the more bonus the general manager will enjoy. Currently.

Honshu is considering acquiring a new apartment complex in Thailand known as Havana Peak with the following information:

Expected revenue                       $16 6 maim
Expected cperehrg expenses           512 59 rnl bon
Asset value                            $20 million

The following are the latest financial information for Honshu in 2018:

S.Ses                            $86.5 million
Operatrg expenses             569.7 million
Taal assets                       $64 million

• Acrux estimated that Honshu's minimum rate of return is 15%.

Required:

Question a. Determine Plunkett Hotel and Resorts breakeven occupancy rate per day.

Question b. Using the old budgeting system. prepare the August. 2018 budget to determine the budgeted profit for the Penang resort (Hint: follow the daily budget illustration for the Penang budget).

Question c. Prepare a report to evaluate Penang resorts performance under the new budgeting system for August 2018. Briefly comment on the General Manager's of Penang resort's performance.

Question d. Atter the adoption of the new budgeting system. almost all other hotels in the Plunkett Hotel and Resorts exhibit occupancy rates trend like the Penang resort. In fact they share similar performance trend as in part (c). Discuss possible explanations for such observation.

Question e. Determine Honshu's ROA in 2018.

Question f. Based on the information given. will the General Manager of Honshu Properties acquire Havana Peak? Explain with supporting computations.

Question g. If the CFO of Acnix Group had the same information as the General Manager of Honshu. would the CFO of Acrux willing to invest in Havana Peak? Explain with supporting computations.

Question h. What is your recommendation to the CFO of Acrux Group as to the performance measurement and incentive system of Honshu Properties?

Attachment:- hotel.rar