The Rate Used to Determine the Sales Price of a Hotel

question 41

True/False

The rate used to determine the sales price of a hotel at the end of a holding period is called the terminal capitalization rate.

---

Definitions:

Discounted Payback Period

The period of time it takes for an investment's cash flows, discounted back to the present value, to cover its initial cost.

Degree of Operating Leverage

A financial metric that measures how a change in sales volume will affect a company's operating income due to fixed and variable costs.

Fixed Costs

Expenses that do not change with varying levels of production or sales, such as rent or salaries.

Depreciation Expense

A measure of the reduction in value of an asset over a given period, used for accounting and tax purposes.