Reference no: EM131831653

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. Rooms sales

a. Average room rate—$50

b. Average daily occupancy—65%

c. Available rooms per day—50

2. Fixed labor—$12,000/month

3. Other fixed expenses

a. Depreciation—$5,000/month

b. Utilities—$3,000/month

c. Insurance—$1,000/month

d. Other—$3,000/month

4. Variable labor—15%

5. Other variable expenses

a. Other room expenses—5%

b. Administration—4%

c. Marketing—5%

d. Utilities—3%

e. Other—8%

6. Income tax rate—20%

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%.