CHAPTER 13
FEASIBILITY STUDIES — AN INTRODUCTION
TRUE OR FALSE QUESTIONS
(Correct answer indicated by T for True and F for False answers)
financially successful.
eliminate the risk.
with other matters such as site evaluation.
the proposed advertising budget.
descriptive and statistical data where these are relevant.
study for a downtown restaurant.
occupancy trends broken down by class of hotel.
occupancies.
been growing at 7% a year. Composite growth rate is 56%.
20%. Annual compound business travel growth is 7% and vacation travel 10%. Total
composite growth rate is 7.6%.
growth rate of demand is 5.5%. Next year’s (year 1) demand for rooms will be 1,895
(to the nearest whole number).
growth rate of demand is 5.5%. Two years from now (year 2) demand for rooms will
be 2,095.
area are averaging 75% occupancy. Total number of rooms presently available in that
area is 2,395.
75% occupancy. Total number of rooms presently available in that area is 4,568.
an occupancy rate of 75%. A new hotel is to be built that will cause all hotels
(including the new one) to operate at a 70% occupancy in the first year. The new
hotel will have 496 rooms.
bridge financing is used for post-opening working capital.
19. A long-term mortgage on a building is also referred to as a permanent mortgage.
20. A permanent mortgage is one on which interest only has to be paid.
beverage inventories.
22. A pro-forma income statement is an income statement calculated on a cash basis.
of sales revenue only.
projected cash flow figures using net present value (NPV) or internal rate of return
(IRR).
MULTIPLE CHOICE QUESTIONS
(Correct answer indicated by asterisk)
1. One of the following statements is not correct. A feasibility study:
2. Which of the following items would not be included in the general market characteristics
section of a feasibility study?
3. Which of the following would not be part of the site evaluation section of a feasibility study?
4. Which of the following would not be part of the supply and demand information section of a
hotel feasibility study?
5. Business travel demand is estimated to comprise 80% and convention delegate demand 20%
for a proposed new hotel. The annual average growth rate in business travel is 4% and
convention delegates 5%. Composite overall average growth rate of demand is:
6. In a particular area, demand for hotel rooms is 60% from business travel, 30% from
convention delegate travel, and 10% from vacation travel. These three markets have been
growing at 8%, 6%, and 5%, respectively. Composite growth rate of demand is:
7. Current average nightly demand for hotel rooms in an area is 898 and composite total growth
rate of demand is 5.5%. Next year’s (Year 1) demand for rooms will be (to the nearest whole
number):
8. Current average nightly demand for hotel rooms in an area is 1,260 and composite total
growth rate of demand is 6%. The demand for rooms in each of the next 3 years (years 1, 2,
and 3), respectively, will be:
9. Average nightly demand for hotel rooms in an area is 2,635. The hotels in that area are
presently averaging 72% occupancy. The total number of rooms available is:
10. Average nightly demand for rooms in an area is 2,635. The hotels in that area are presently
averaging 72% percent occupancy. Assume a new hotel is to be built that will cause
occupancy for all hotels (including the new one) to drop to 65% in the first year (Year 1).
11. Interim financing is the same as:
12. A chattel mortgage is a: