Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I am doing the stardust canyon ski resort. I am needing to figure out the fixed and variables for this Stardust Canyon Ski Resort You
I am doing the stardust canyon ski resort. I am needing to figure out the fixed and variables for this
Stardust Canyon Ski Resort
You work for a venture capitalist and have been asked to analyze a proposal from a group of
investors interested in building a new ski area in Colorado, the Stardust Canyon Ski Resort. The
demand for skiing is growing. Existing ski resorts have raised prices and reported record profits
for the last two seasons. Stardust Canyons business strategy is to offer the ultimate ski
experience short lift lines, uncongested ski slopes and spectacular scenery. With a foot
vertical drop, trails, and a single triple three person ski lift, it can provide a very
uncongested ski resort. The resort will have a tripleperson ski lift. The planned tripleperson
ski lift delivers a chair every seconds, chairs per hour chairs per minute X minutes
per hour or skiers per hour chairs per hour X skiers per chair This puts an average
of only skiers per hour on each of the trails. Some trails will be more popular than others,
but this average number of skiers per trail per hour is still below industry average.
The cost to build the ski runs, parking lots, and buildings and to erect the chair lift is $ million.
To raise this amount of capital requires an annual financing cost debt service and dividends
of $ million. The annual fixed operating cost land lease, utilities, labor, taxes, insurance of
the ski resort is projected to be $ million. For each skiers per day, additional employees
must be hired to staff the ticket office, ski patrol, parking lots and so forth. The daily cost of the
additional labor is $ per skiers per day.
The typical skier makes two ski runs per day uses the lift twice Ski resorts operate their lifts
hours per day, days per year. Stardust Mountain plans to sell oneday lift tickets for $
per skier per day: No season passes will be offered. "tilize and excel spreadsheet to complete the assignment.
Identify the Fixed and Variable costs in this case
list the cost name, the amounts, and the total of fixed cost and total for variable costs
Note for costs, you will use cash flows and not expenses
in other words, you will not need to compute depreciation
since you will just need to focus on cash flows. Note that debt service includes principal and interest. The principle payment is a close approximation of the depreciation and therefore you will not need to compute depreciation
Assuming each skier utilizes the chair lift twice a day
as stated in the case
how many skier days are needed to break
even?
be sure to clearly show your computations and label your numbers
Note that you MUST use cell formulas. A user should be able to utilize your spreadsheet using
what
if
analysis and have your spreadsheet automatically compute the answer. For example, if I change one of the variables,
revenue per skier for example
your spreadsheet should show a new break
even amount
Maximum cash flow and Return on Investment
a
Compute the maximum yearly cash flow possible for the ski resort based upon
the information given for capacity.
b
Based upon the maximum cash flow, compute the annual return on the initial
investment.
use the cash flow for your return
Identify what additional information you need beyond what is provided by the case.
I
have had people actually get some of the additional information by providing their own research and apply it to the case. You will receive extra credit commensurate to the usefulness of this research if you include it
You must supply reference links or a copy of the research.
Recommendation
Your analysis will be given to the venture capitalists. You will recommend one of three actions. In this section, make sure that you are referring to the facts in the previous section.
Aggressively pursue the investment
YOU MUST SUPPORT THIS RECOMMENDATION
WITH DATA FROM THE CASE OR YOUR RESEARCH!
Gather more information
if you choose this one, you need to be specific on what
more information
you should gather and how the information obtained would impact your decision
YOU MUST SUPPORT THIS RECOMMENDATION WITH DATA FROM THE CASE OR YOUR RESEARCH!
Reject proposa
YOU MUST SUPPORT THIS RECOMMENDATION WITH DATA FROM THE CASE OR YOUR RESEARCH!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started