Introduction Management is critical to the success of any business venture (Talluri & Ryzin 2005). This proposal addresses the low-occupancy problem at City Hotel Limited by selecting the most suitable choice from the available alternatives. This proposal also evaluates the possible outcomes of adopting various investments options. Objectives of the Project to be Undertaken The objectives of this project include:   * Carrying out a financial evaluation of alternative options to improve the hotel’s profitability.   * Determining the profitability of accepting a proposed contract with a Japanese firm.   * Undertaking a risk assessment of the various alternatives.   * Making recommendations of the alternatives assessed. Options to be Evaluated Continuing to Run the Hotel in its Current Format This option will assume that the hotel’s profitability will decrease due to forecast reduction in room occupancy levels of 5% each year for the next five years. Refurbishing the Hotel Refurbishing the hotel will cost £2.5 million. The expected increase in occupancy will be estimated at 5%, which will be assumed to be constant for the next five years. Leasing the Hotel for Five Years The firm can consider leasing 100 rooms to the Japanese staff for five years because it guarantees a five-year income. The leasing of rooms only means that the hotel will not have salaries to cater for thus reducing overhead costs. The capital investment cost of this option is £1m. Introducing Weekend Discounts The use of weekend discounts will assume that discounts will attract clients and increase room occupancy. Appraisal Methodology Profit and Loss Accounts The profit and loss accounts for the various alternatives will be used to determine the most viable alternatives. The variable cost of the rooms will be determined by apportioning the total cost and adding to the additional cost of refurbishing the rooms according to the specifications of the Japanese firm. The total cost will be determined by adding the depreciation. The total costs will be used to consider the price to be charged. Effects of Discounts on Room Occupancy The effect of discount on room occupancy will be determined by comparing the hotel occupancy and income at various process points of £50 per room, £45 per room, £40per room and £35 per room. Investment Appraisal Methodology Accounting Rate of Return (ARR) The accounting rate of return conveys the profits obtained from a venture as a percentage of the preliminary capital cost (Röhrich 2007). The main benefit of ARR is its straightforwardness, which makes it easy to comprehend. Its similarity to commonly employed measures such as the average rate of return and the fact that it is stated as a percentage make it easier for managers to use. However, ARR does not consider the duration of the project or the scheduling of cash flows all through the project. Additionally, the perception of profit is prejudiced and varies with different accounting practices as well as the capitalisation of project costs. Consequently, the computation of ARR for similar ventures may yield different results from business to business. Also, ARR does not provide managers with a clear indicator to guide their decision regarding making an investment or not. Payback P