Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun destination to eco-tourism. (Eco-tourism focuses on environmental awareness and education. How would you classify the following projects in terms of compliance. strategic, and operational? a Convert the pool heating system from electrical to solar power. b. Build a four-mile nature hiking trail. c. Renovate the horse barn. d Launch a new promotional campaign with Hawaii Airlines c. Convert 12 adjacent acres into a wildlife preserve. f. Update all the bathrooms in condos that are 10 years old or older. 2. Change hotel brochures to reflect eco-tourism image. h Test and revise disaster response plan. i. Introduce wireless Internet service in caf and lounge areas. How casy was it to classify these projects? What made some projects more difficult than others? What do you think you now know that would be useful for managing projects at the hotel? 2. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of 50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? 3. A five-year project has a projected net cash flow of $15.000, $25,000 $30,000, $20,000, and $15.000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. 4. You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. The following chart shows the cash information for each project. Which of the two projects would you fund if the decision is based only on financial information? Why? "The solution to these exercises can be found in Appendix One. Chapter 2 Organisation Stutegy and Project Selection 53 Omega Year YO Y1 Y2 Y3 Y4 Inflow 0 0 $ 150.000 220.000 215.000 205.000 197,000 100.000 1,087,000 Outflow $225,000 190,000 0 30,000 Netflow -225.000 - 190,000 150.000 190.000 215.000 175.000 197.000 70.000 582,000 Alpha Year YO Y1 Y2 Y3 Y4 Y5 Y5 77 Total Inflow 0 $50,000 150,000 250,000 250,000 200,000 180,000 120,000 1.200,000 Outflow $300,000 100,000 0 50,000 0 50,000 0 30,000 530,000 Netflow -300.000 -50,000 150.000 200.000 250,000 150.000 180.000 90.000 670,000 30,000 Y6 Y7 Total 30,000 505,000 Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun destination to eco-tourism. (Eco-tourism focuses on environmental awareness and education. How would you classify the following projects in terms of compliance. strategic, and operational? a Convert the pool heating system from electrical to solar power. b. Build a four-mile nature hiking trail. c. Renovate the horse barn. d Launch a new promotional campaign with Hawaii Airlines c. Convert 12 adjacent acres into a wildlife preserve. f. Update all the bathrooms in condos that are 10 years old or older. 2. Change hotel brochures to reflect eco-tourism image. h Test and revise disaster response plan. i. Introduce wireless Internet service in caf and lounge areas. How casy was it to classify these projects? What made some projects more difficult than others? What do you think you now know that would be useful for managing projects at the hotel? 2. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of 50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? 3. A five-year project has a projected net cash flow of $15.000, $25,000 $30,000, $20,000, and $15.000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. 4. You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. The following chart shows the cash information for each project. Which of the two projects would you fund if the decision is based only on financial information? Why? "The solution to these exercises can be found in Appendix One. Chapter 2 Organisation Stutegy and Project Selection 53 Omega Year YO Y1 Y2 Y3 Y4 Inflow 0 0 $ 150.000 220.000 215.000 205.000 197,000 100.000 1,087,000 Outflow $225,000 190,000 0 30,000 Netflow -225.000 - 190,000 150.000 190.000 215.000 175.000 197.000 70.000 582,000 Alpha Year YO Y1 Y2 Y3 Y4 Y5 Y5 77 Total Inflow 0 $50,000 150,000 250,000 250,000 200,000 180,000 120,000 1.200,000 Outflow $300,000 100,000 0 50,000 0 50,000 0 30,000 530,000 Netflow -300.000 -50,000 150.000 200.000 250,000 150.000 180.000 90.000 670,000 30,000 Y6 Y7 Total 30,000 505,000