A corporation to build a hotel. Planned expenditures for the purchase of the land are 1 million Euro, construction works will amount to 4 million Euro. The anticipated income from a rented room per day will be 100 Euro and variable costs (electricity, the average variable cost of cleaning, food waste) at 18 Euro per rented room / day. Planned annual fixed costs of maintaining the hotel amount to 550 thousand Euro. The building will be depreciated over 10 years. After the period of analysis the building will not present a significant value. Analyses show that, in order to successfully operate a company must provide working capital for about 50 thousand Euro. It is estimated that the residual value of land and working capital will amount to 4 600 thousand Euro. WACC of the company can be calculated based on following assumption: share of debt = 40%, tax rate = 20%, risk free rate = 3%, market risk premium = 5%, beta 1,4, cost of debt = 6%.
Based on the presented information,
Calculate the annual turnover, which guarantees the NPV at level 0.
An average hotel occupancy rate, which guarantees the NPV at 0, given 90 rooms in the hotel.