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

TVM bonds, Focus Company issued a $30,000, 20 year bond with a stated inter...

Focus Company issued a $30,000, 20 year bond with a stated interest rate of 7%. Assume interest payments are made annually. What is the selling price of the bond if the market ra

Abatement of legacies-executorship laws and accounts, ABATEMENT OF LEGACIES...

ABATEMENT OF LEGACIES (a) If the assets, after the payment of debts, necessary expenses and specific legacies, are not sufficient to pay all the general legacies in full, the l

What is auditors report explain, Q. What is Auditors report explain? Sp...

Q. What is Auditors report explain? Special Report - Special report is a term used for Auditors' reports issued in connection with various types of financial presentations, inc

Business risk in company, Q. Business risk in company? Business risk is...

Q. Business risk in company? Business risk is the likelihood of a company experiencing changes in the level of its profit before interest as a result of changes in turnover or

Shorter discounting periods, Occasionally cash flows may have to be discoun...

Occasionally cash flows may have to be discounted more often than once a year semi- monthly, daily, annually or quarterly.  The outcome of this is as fold (i)  The number of per

Caselet, prepare your recommendation on Agarwal cast company

prepare your recommendation on Agarwal cast company

Assertion, Assertion -Implicit or explicit representations by an entity's m...

Assertion -Implicit or explicit representations by an entity's management which are embodied infinancial statement components and for which AUDITOR obtains and evaluates evidential

The partnership deed, The Partnership Deed It is the agreement that reg...

The Partnership Deed It is the agreement that regulates the partner’s actions in undertaking the partnership business. This may or may not have been drawn up.  It usually conta

Indian company, content of financial statement with refrence to indian comp...

content of financial statement with refrence to indian company

The surplus capital method-partnership, THE SURPLUS CAPITAL METHOD Unde...

THE SURPLUS CAPITAL METHOD Under this method, the initial amounts repaid to partners are in order to reduce their capitals to amounts such that these are now in the same ratio

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