Case law, Financial Accounting

Assignment Help:

GOLD MOUNTAIN SKI RESORT CASE
You work for a venture firm and have been asked to analyze a proposal from a group of investors interested in building a new ski area in Colorado. The demand for skiing is growing and existing resorts have raised prices and reported record profits for the last two seasons.
Gold Mountain's business strategy is to offer the ultimate ski experience; short lift lines, uncongested ski slopes, and spectacular scenery. With a 2,500 foot vertical drop, 10 trails, and one triple (three person) ski lift, it can provide a very uncongested ski resort. The planned triple-person lift delivers a chair every 20 seconds, 180 chairs per hour (3 chairs per minute, 60 minutes per hour), or 540 skiers per hour (180 chairs per hour, 3 skiers per chair). This puts an average of only 54 skiers per hour on each of the 10 trails. Some trails will be more popular than others, but this average number of skiers per trail per hour is still below the industry average.
The cost to build the ski runs, parking lots, and buildings and to erect the chair lift is $52M. To raise this amount of capital requires an annual financing cost (debt service & dividends) of $8.3M. The annual fixed operating cost (land lease, utilities, labor, taxes, and insurance) of the ski resort is projected to be $4.1M. For each 100 skiers per day, additional employees must be hired to staff the ticket office, ski patrol, parking lots, etc. The daily cost of the additional labor is $200 per 100 skiers per day.
The typical skier makes two ski runs per day (uses the lift twice). Ski resorts operate their lifts 8 hours per day, 120 days per year. Gold Mountain plans to sell one day lift tickets for $60 per skier, no half day or season passes will be offered.
Required:
Part A: Write a memo to the venture partner in charge of this account recommending one of three actions: aggressively pursue this investment; gather more information; or reject the project. Justify your recommendation with a concise, well-reasoned, fact based analysis. In addition to the memo, you should attached an easy to understand spreadsheet that shows your full analysis of the numbers. In the spreadsheet, you should design an input area for further "what-if analysis" that allows for changes to be made in the base numbers. This input area should flow to the calculations in your spreadsheet.
Part B: After completing your analysis in Part A, but before you submit the memo to your boss, Gold Mountain informs you that they are considering a change from the triple-person lift to a four-person chair lift. The new chair lift will add an additional $75,000 per year to the annual financing cost, bringing the annual financing cost to $8.375M. This lift will be able to carry 720 skiers per hour, as the triple would only carry 540 per hour. How do these changes alter your conclusion from Part A? Add this new analysis and discussion of the possible change to your memo.
Part C: In addition to the information you have been given, consider alternatives to the existing plan that you might recommend to make the venture more successful. If your ideas increase revenues and/or expenses, be sure to incorporate those estimates into your analysis to show the effect


Related Discussions:- Case law

Items reducing the deficit-liquidation of companies, Items reducing the def...

Items reducing the deficit: Items reducing the deficit would include: (a)    Profits from trading; (b)    Estimated profit on the realisation of assets. Notes: (a) Whe

Presentation method-foreing branches, Presentation method (formerly closin...

Presentation method (formerly closing rate or net investment method) Under this method, the branch operates with a lot of degree of autonomy from the head office. This position i

Illustration of corporate tax-income tax-financial statement, Illustration ...

Illustration of Corporate tax During the year ended31/12/2003, A Ltd. had estimated the corporation tax for the year to be £100,000. The amount was still outstanding as at 31/1

Prepare a statement of cash flows, The comparative balance sheet of Portabl...

The comparative balance sheet of Portable Luggage Company at December 31, 2008 and 2007, is as follows An examination of the income statement and the accounting records revealed th

Enumerate the characteristics of accounting information, Enumerate the char...

Enumerate the characteristics of accounting information Qualities, or characteristics, which have just been depicted would help us to decide whether accounting information is p

Determine the features of accounting information system, Determine the Feat...

Determine the Features of Accounting information system Accounting information system must have certain features which are common to all valid information systems within a bus

Hsa advantages , A HEALTH SAVINGS ACCOUNT AT FRONTLINE PR Susan Berry...

A HEALTH SAVINGS ACCOUNT AT FRONTLINE PR Susan Berry just returned from a national conference on compensation and benefits where she attended a session on Health Savings Accou

Determine the overvalue or undervalue of share, The New York Jets have deci...

The New York Jets have decided to go public and are offering new shares for $40. Since the Jets want to build a new stadium, the firm will retain all earnings and will not issue an

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd