The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel is seeking a $90,000 bank loan bearing a 10 per cent annual rate of interest. Mr Scroogy, the manager of the bank considering the loan application, requi motel to produce a budgeted income statement for next year, 20x1. Mr Scroogy requires this information to help him assess RitzyRooms' credit risk. RitzyRooms' accountant has assembled the following schedule of information to facilitate preparation of 20X1's budgeted income statement. Number of single rooms Estimated ocupancy of single rooms Single rooms' projected average room rate Average contribution earned on single rooms Number of double rooms Estimated occupancy of double rooms 10 70% $50 85% 30 40% $70 Double rooms' projected average room rate Average contribution earned on double rooms Operating fixed costs per annum (not including loan intei #ean Tax rate levied on profit after deduction of interest exper 90% 40% equired: 20X1 le the interest on the $90.000 loan in the budgeted statement.
The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel is seeking a $90,000 bank loan bearing a 10 per cent annual rate of interest. Mr Scroogy, the manager of the bank considering the loan application, requi motel to produce a budgeted income statement for next year, 20x1. Mr Scroogy requires this information to help him assess RitzyRooms' credit risk. RitzyRooms' accountant has assembled the following schedule of information to facilitate preparation of 20X1's budgeted income statement. Number of single rooms Estimated ocupancy of single rooms Single rooms' projected average room rate Average contribution earned on single rooms Number of double rooms Estimated occupancy of double rooms 10 70% $50 85% 30 40% $70 Double rooms' projected average room rate Average contribution earned on double rooms Operating fixed costs per annum (not including loan intei #ean Tax rate levied on profit after deduction of interest exper 90% 40% equired: 20X1 le the interest on the $90.000 loan in the budgeted statement.
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.6C
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Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
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Transcribed Image Text:3 Problem 9.9
S The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel is seeking a $90,000 bank loan bearing a 10 per cent annual rate of interest. Mr Scroogy, the manager of the bank considering the loan application, requires the
6 motel to produce a budgeted income statement for next year, 20X1. Mr Scroogy requires this information to help him assess RitzyRooms' credit risk.
7 RitzyRooms' accountant has assembled the following schedule of information to facilitate preparation of 20X1's budgeted income statement.
Number of single rooms
Estimated occupancy of single rooms
Single rooms' projected average room rate
Average contribution earned on single rooms
Number of double rooms
10
70%
$50
85%
2.
30
40%
$70
Estimated oocupancy of double rooms
Double rooms' projected average room rate
Average contribution earned on double rooms
Operating fixed costs per annum (not including loan inter ####H#H
Tax rate levied on profit after deduction of interest exper
90%
40%
Required:
a) Assuming the motel is open for 360 days in the year, prepare the budgeted income statement for 20X1. Include the interest on the $90,000 loan in the budgeted statement.
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