Reference no: EM133580310

Case Study: As I mentioned over the last couple of weeks, the movie theater I worked at wants to add a new movie theater inside their current theater. There are going to be some risks to this plan of course. The first risk is spending too much money on the retrofit of the theater to add the new one, the second risk is not making enough money on the new theater to pay it off quickly or be worth the money spent, and the third risk is doing the retrofit too quick and doing a poor job so they keep having to put money into the new theater to repair or update poor construction. This is a high-risk project. The theater is in a good place to do this project and they are very capable of managing this new project. They already make good money from the current theaters and concessions, it is more than enough to try new things and try to experiment with new ideas. They may go cheap on the new theater, but not enough to endanger the project as a whole and it will be cheap enough that they will be able to pay it off upfront or very quickly.

The risk of this project is that it may damage the theater's reputation and cause them to lose money and business. This could cause them to suffer financial hardship for quite some time or even close the business. The benefit to the project is the new profits and customers they will be able to bring into the theater. The positive benefits, if they shake out, far outweigh the negative benefits over the long-term health of the business. I would recommend the theater move forward with this project.

QUESTION:

• Ask a question about or provide an additional suggestion for the risks that your colleague's organization might face if it engaged in the capital investment project.
• Provide an additional perspective on the level of risk associated with the project your colleague identified for their selected organization or on how willing/capable the organization might be in taking on and managing the risks your colleague identified.
• Offer an insight you gained from your colleague's summary of the trade-offs between risks and returns and/or their recommendation for their selected organization to move or not move forward with the project.