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

Lease or buy, La Favorite Pastry Shop has been in business since 1985 and s...

La Favorite Pastry Shop has been in business since 1985 and started with a large commercial oven that was built in 1955. Max, the owner is debating whether or not to purchase a new

What is its ending retained earnings balance, Q. The following selected amo...

Q. The following selected amounts are available for Vizio Company. Retained earnings (beginning) $1,600 Net loss 300 Cash dividends declared 200 Stock dividends declared 200 What i

WorldCom Case Study1, When well conceived and executed properly, a growth-t...

When well conceived and executed properly, a growth-through-acquisition strategy is an accepted method to grow a business. What went wrong at WorldCom? Is there a need to put in pl

Trial balance, Jim owns and manages a small business, which provides an off...

Jim owns and manages a small business, which provides an office design service, as well as buying and selling office furniture. Jim is a sole trader who manages all aspects of the

State the users of accounting information, State the users of accounting in...

State the users of accounting information Environment has brought new challenges for managers and other users of accounting information. Their requirements have changed and bot

Illustration of consolidated balance sheet, Illustration of consolidated ba...

Illustration of consolidated balance sheet H Ltd owned S Ltd since the date of incorporation of S Ltd. The balance sheets of the two  companies as at 31 December 20X2 is as fo

Receiver appointed by court-bankruptcy and liquidation, Receiver appointed ...

Receiver appointed by court If appointed by the court, the receiver must give security as directed by the court. The following notification must be given: (a) The debenture h

Flexible budget and static budget, Brabham Enterprises manufactures tires f...

Brabham Enterprises manufactures tires for the Formula One motor racing circuit. For August 2011, Brabham budgeted to manufacture and sell 3,000 tires at a variable cost of $74

Compute the companys largest available depletion deduction, In May 2011, Yo...

In May 2011, Your Company purchased the rights to a natural resource for $4,125,000. The estimated recoverable units from the natural resource amount to 5,500,000 units. During the

Breach of trust-trusts laws and accounts, BREACH OF TRUST Remedies avai...

BREACH OF TRUST Remedies available to beneficiary: Injunction, Personal action, Criminal liability. Defence of trusts: He may be relieved from liability if, in the opini

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