Reference no: EM131720411
Case Study - SUN STAR HOTEL
Said Al Hamli and his friend Khaled Al Masri are the owners of a small hotel, the Sun Star, in the Red Sea town of Hurghada. Close to Cairo, the resort town has grown from a fishing village to one of Egypt's famous vacation spots.
Hurghada is the gateway to many small islands and offshore reefs favored by recreational snorkelers and divers and many tourists combine their stay with excursions to the Nile Valley, the Great Pyramids and Luxor.
To take advantage of the growing numbers of tourists, particularly from Europe and the Middle East, Said and Khaled are planning to double the room capacity of their hotel by adding a second building to the already existing structure. Fortunately, Said recognized the great potential of Hurghada ten years ago, well before the town became a hub for recreational tourism, and bought the land adjacent to the hotel for relatively little money when it was still under construction. Now, Said and Khaled are studying the new layout and trying to determine if the expected revenues justify the substantial initial invest¬ment of EGP 70 million ($11.8m).
According to their calculations, operating cost would rise by EGP 23 8 million ($4m) in the first year, which would include hiring and train¬ing of new personnel, maintenance of facilities and equipment etc., and likely increase by about 5 percent per year thereafter. With an aggressive marketing strategy, Said and Khaled believe that a revenue enhancement of EGP 20.8 million in the first year is realistic and that a subsequent annual increase of about 15 percent for eight to nine years, with revenues leveling off thereafter, can be achieved.
Ideally, Khaled would like to retire in ten years. Seeking advice from you, a knowledgeable friend, they share their detailed cost and revenue projections with you.
| Year |
Cost in EGP |
Revenue in EGP |
|
0
|
-70,000,000
|
|
|
1
|
-23,800,000
|
20,825,000
|
|
2
|
-24,990,000
|
23,949,000
|
|
3
|
-26,239,000
|
27,541,000
|
|
4
|
-27,551,000
|
31,672,000
|
|
5
|
- 28,929,000
|
36,423,000
|
|
6
|
-30,375,000
|
41,887,000
|
|
7
|
-31,894,000
|
48,169,000
|
|
8
|
-33,489,000
|
55,395,000
|
|
9
|
-35,163,000
|
63,704,000
|
|
10
|
-36,922,000
|
73,259,000
|
Determine the resulting net cash flow for each year and compute:
1. The net present value.
2. The internal rate of return.
3. The modified internal rate of return.
4. The simple payback period.
5. The discounted payback period.
6. The profitability index.
Interpret each result in terms of the project's expected profitability and Khaled's ten-year investment horizon.
|
Punnett square to predict the frequencies
: Punnett square to predict the frequencies of the genotypes and phenotypes of the offspring expected, if the female has genotype ssee
|
|
Calculating interest costs
: Angie Justice, chief engineer, estimated that the renovated plant would be used for 15 years, Concord uses a 360-day year for calculating interest costs
|
|
How has the earth''s biodiversity changed through time
: Overall, how has the earth's biodiversity changed through time? How did the activities of living organisms change the planet in a way that made
|
|
Define barbara resnick nursing theory of self-efficacy
: Barbara Resnick, nursing theory of Self-Efficacy. Within focus of nursing, assumptions, concepts, concepts relationship, can be applied
|
|
Determine the resulting net cash flow
: Determine the resulting net cash flow for each year and compute The net present value - Interpret each result in terms of the project's expected profitability
|
|
Alteration of bacterial cell osmotic equilibrium
: At low concentrations, CHG causes an alteration of bacterial cell osmotic equilibrium, resulting in leakage of potassium and phosphorus
|
|
Responsible for the current extinction event
: What single factor is most likely responsible for the current extinction event, and how does it differ from the causes of the five previous mass extinctions?
|
|
The difference between random sampling random assignment
: What is the difference between random sampling and random assignment. Describe one disadvantage related to sample size when using random sampling method
|
|
Pertaining to mitosis and meiosis
: How might the information gained from this lab pertaining to mitosis and meiosis be useful to you in your everyday life or to a healthcare professional?
|