Using the Case Study information from Stone Rock Golf & Country Club, calculate the net cash flows for years 1-10 for the Hideaway:
The Hideaway Roberts and Kelly named the converted maintenance facilitythe potential new venue spacethe Hideaway to differentiate it from the existing Ballroom. In order to operate both spaces at the same time, Roberts knew they needed to expand the existing kitchen and create access from the kitchen to both spaces and purchase an additional $100,000 in kitchen equipment. Further, a grand entrance to the space was needed as well as outdoor space for cocktail receptions overlooking the golf course. Other renovations to the current space included washroom additions, a bridal suite, and a generator to provide back-up power for both the Ballroom and the Hideaway (see Exhibit 4). Roberts estimated that the renovations to transform the maintenance facility into the Hideaway would be $445,000. To keep the renovation and operating costs of the space lower and to add to the industrial feel, the Hideaway renovations would not include insulating or heating the space for winter use. Therefore, Roberts and Kelly planned to host weddings in the space during the peak wedding season and the warmer monthsfrom May through to October. Estimated sales per wedding would be slightly higher than the current averages for the Ballroom at $13,500 for Saturday weddings and $10,500 for Sunday to Friday weddings, as the Hideaway would have a capacity of 210 guests for a seated meal or 250 guests for a standing cocktail reception; the Ballroom had a capacity of 180 guests seated and 200 standing. Kelly estimated that 65 per cent of the weddings and special events would be seated meals and the remaining 35 per cent standing cocktail receptions. Kelly predicted that, in 2017, the Hideaway would host 15 Saturday weddings, at $13,500 each, and another three weddings on other days of the week, at $10,500 each. Since the Ballroom was already nearly sold out for prime dates in the 2017 wedding season, Kelly was confident the club could achieve this projection based on the waiting list and number of potential clients who had already been turned away. By the second year of operating both spaces, Kelly projected the Hideaway would host 18 Saturday and five non-Saturday weddings. Finally, in 2019, the Hideaway would host the full capacity of 21 Saturday weddings and another seven non-Saturday weddings. Each year, Kelly planned to increase the price per wedding by 2 per cent. In addition to weddings, Kelly estimated other opportunities to rent out the space would generate an additional $15,000 in revenue in 2017, $25,000 in 2018, and $35,000 in 2019. Again, she estimated a steady increase thereafter of 2 per cent. Kelly also recognized that, to deliver two weddings at the same time, the number of kitchen and wait staff would have to increase significantly, and both wedding timelines would have to be perfectly aligned to keep the kitchens running smoothly. Staffing the now-double wedding operation would be a challenge in such a small town. She expected to be able to hire temporary foreign workers to help with the kitchen and service requirements of the peak season. However, Kelly and Roberts would have to research how this process worked and consult with the board about this plan. Projected CFs from use of Updated Hideaway facility Year: 1 2 3 4 5 6 7 OC 9 10 The Hideaway Roberts and Kelly named the converted maintenance facilitythe potential new venue spacethe Hideaway to differentiate it from the existing Ballroom. In order to operate both spaces at the same time, Roberts knew they needed to expand the existing kitchen and create access from the kitchen to both spaces and purchase an additional $100,000 in kitchen equipment. Further, a grand entrance to the space was needed as well as outdoor space for cocktail receptions overlooking the golf course. Other renovations to the current space included washroom additions, a bridal suite, and a generator to provide back-up power for both the Ballroom and the Hideaway (see Exhibit 4). Roberts estimated that the renovations to transform the maintenance facility into the Hideaway would be $445,000. To keep the renovation and operating costs of the space lower and to add to the industrial feel, the Hideaway renovations would not include insulating or heating the space for winter use. Therefore, Roberts and Kelly planned to host weddings in the space during the peak wedding season and the warmer monthsfrom May through to October. Estimated sales per wedding would be slightly higher than the current averages for the Ballroom at $13,500 for Saturday weddings and $10,500 for Sunday to Friday weddings, as the Hideaway would have a capacity of 210 guests for a seated meal or 250 guests for a standing cocktail reception; the Ballroom had a capacity of 180 guests seated and 200 standing. Kelly estimated that 65 per cent of the weddings and special events would be seated meals and the remaining 35 per cent standing cocktail receptions. Kelly predicted that, in 2017, the Hideaway would host 15 Saturday weddings, at $13,500 each, and another three weddings on other days of the week, at $10,500 each. Since the Ballroom was already nearly sold out for prime dates in the 2017 wedding season, Kelly was confident the club could achieve this projection based on the waiting list and number of potential clients who had already been turned away. By the second year of operating both spaces, Kelly projected the Hideaway would host 18 Saturday and five non-Saturday weddings. Finally, in 2019, the Hideaway would host the full capacity of 21 Saturday weddings and another seven non-Saturday weddings. Each year, Kelly planned to increase the price per wedding by 2 per cent. In addition to weddings, Kelly estimated other opportunities to rent out the space would generate an additional $15,000 in revenue in 2017, $25,000 in 2018, and $35,000 in 2019. Again, she estimated a steady increase thereafter of 2 per cent. Kelly also recognized that, to deliver two weddings at the same time, the number of kitchen and wait staff would have to increase significantly, and both wedding timelines would have to be perfectly aligned to keep the kitchens running smoothly. Staffing the now-double wedding operation would be a challenge in such a small town. She expected to be able to hire temporary foreign workers to help with the kitchen and service requirements of the peak season. However, Kelly and Roberts would have to research how this process worked and consult with the board about this plan. Projected CFs from use of Updated Hideaway facility Year: 1 2 3 4 5 6 7 OC 9 10
