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Deter Problem 13 ise Place Inn, a proposed 30-room motel with a fully equipped restaurant,...

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Deter Problem 13 ise Place Inn, a proposed 30-room motel with a fully equipped restaurant, will cost 750,000 to construct. An estimated additional $50,000 will be invested in the business as working capital. Of the total $800,000 investment, $400,000 is to be secured from the Columbo Federal Bank at the rate of 10 percent interest. The projected occupancy rate is 80 percent for the year. The owners desire a 15 percent return on equity after the corporation pays income taxes of 25 percent. The estimated undistributable expenses, not including income taxes and interest expense, total $480,000. The estimated direct expenses of the rooms department are $7 for each room sold. Consider a year to have 365 days. Required: 1. Determine the average price of a room using the Hubbart Formula, assuming the con- tribution from the restaurant department is $0. 2. If the double rooms are sold at a premium of $10 over singles, what is the price of singles and doubles? Assume a double occupancy rate of 40 percent. 3. If the restaurant generates a department profit of $20,000 per year, how much may average room rates be decreased and still meet the owners' financial goals

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