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  • Phuket Beach Case Solution

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    Gmit
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    The document compares the cash flows and financial projections of two pub business options: Planet Karaoke Pub (PKP) and Beach Karaoke Pub (BKP). PKP has an upfront renovation cost of $770,000 and would generate rental income of $204,000 - $214,000 per year over 4 years. BKP has an upfront investment cost of $1,700,000 and is projected to have sales of $467,000 - $596,000 over 6 years. Both options are projected to have annual increases in repair/maintenance costs of $10,000 each year. They are also projected to have annual decreases in room revenue of 12.5% of

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    Phuket_Beach_Case_Solution

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    The document compares the cash flows and financial projections of two pub business options: Planet Karaoke Pub (PKP) and Beach Karaoke Pub (BKP). PKP has an upfront renovation cost of $770,000 and would generate rental income of $204,000 - $214,000 per year over 4 years. BKP has an upfront investment cost of $1,700,000 and is projected to have sales of $467,000 - $596,000 over 6 years. Both options are projected to have annual increases in repair/maintenance costs of $10,000 each year. They are also projected to have annual decreases in room revenue of 12.5% of

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    © All Rights Reserved
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    73 views8 pages

    Phuket Beach Case Solution

    Uploaded by

    Gmit
    The document compares the cash flows and financial projections of two pub business options: Planet Karaoke Pub (PKP) and Beach Karaoke Pub (BKP). PKP has an upfront renovation cost of $770,000 and would generate rental income of $204,000 - $214,000 per year over 4 years. BKP has an upfront investment cost of $1,700,000 and is projected to have sales of $467,000 - $596,000 over 6 years. Both options are projected to have annual increases in repair/maintenance costs of $10,000 each year. They are also projected to have annual decreases in room revenue of 12.5% of

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 8

    ***Upfront Cost PKP***

    Renovation cost 770000

    ***Upfront Cost BKP***


    Investment 800000 * Also Given Capital Expenditure anually will be
    Equipment and Setup 900000 equal to the depriciation
    Total 1700000

    ***If Rented to PKP***


    Year 1 2 3 4
    Rental Income 2040000 2040000 2142000 2142000

    ***Forcasted Sales BKP***


    Year 1 2 3 4 5
    Sales 4672000 4905600 5150880 5408424 5678845

    ***Other Costs BKP***


    Year 1 2 3 4 5
    Food & Bevrage 1168000 1226400 1287720 1352106 1419711
    Operating Expenses 1027840 1079232 1133194 1189853 1249346

    ***Increase in Repair and Maintainence(Applicable to Both)***


    Year 1 2 3 4 5
    Annual Charge 10000 10000 10000 10000 10000

    ***Projection Net Room Revenue Phuket Beach(Applicable to Both)***


    Year 1 2 3 4 5
    Net Room Revenue 13200000 13464000 14137000 14844000 15140000
    ***Loss on Room Revenue due to unwelcome guests(Applicable to Both)***
    Year 1 2 3 4 5
    Loss (12.5% of Revenue) 1650000 1683000 1767125 1855500 1892500

    ***Also Given***
    We 75% WACC 10.75%
    Wd 25%
    Ke 12%
    Kd 10%
    Tax rate 30%

    Year 1 2 3 4 5
    PVIFA 0.90293454 0.81529078 0.7361542 0.66469905 0.60017973
    nditure anually will be

    6
    5962787

    6
    1490697
    1311813

    )***
    6
    10000

    Both)***
    6
    15443000
    o Both)***
    6
    1930375

    6
    0.54192301
    ***Planet Karaoke Pub***
    Cashflows Year 0 Year 1 Year 2
    Rental Income - 2040000 2040000
    Depriciation - -192500 -192500
    Increase in Maintainence - -10000 -10000
    Decrease in room revenue - -1650000 -1683000
    Additional Operating Income - 187500 154500
    Taxes (30%) - -56250 -46350
    Net Operating Income - 131250 108150
    Depriciation - 192500 192500
    Capital Expenditure -770,000 - -
    Total Operating Cashflow -770000.00 323750.00 300650.00

    Discounting Cashflows as per WACC 292325.00 245117.00


    Year 3 Year 4
    2142000 2142000
    -192500 -192500
    -10000 -10000
    -1767125 -1855500
    172375 84000
    -51713 -25200
    120663 58800
    192500 192500
    - -
    313163.00 251300.00

    230536.00 167039.00
    ***Beach Karaoke Pub***
    Cashflows Year 0 Year 1 Year 2 Year 3
    Sales - 4672000 4905600 5150880
    Food and Beverage cost - -1168000 -1226400 -1287720
    Other Operating cost - -1027840 -1079232 -1133194
    Depriciation - -283333 -283333 -283333
    Increase in Maintainence - -10000 -10000 -10000
    Decrease in room revenue - -1650000 -1683000 -1767125
    Additional Operating Income - 532827 623635 669508
    Taxes (30%) - -159848 -187090 -200852
    Net Operating Income - 372979 436544 468655
    Depriciation - 283333 283333 283333
    Capital Expenditure -1,700,000 -283333 -283333 -283333
    Total Operating Cashflow -1700000.00 372979.00 436544.00 468655.00

    Discounting Cashflows as per WACC 336776.00 355910.00 345002.00


    Year 4 Year 5 Year 6
    5408424 5678845 5962787
    -1352106 -1419711 -1490697
    -1189853 -1249346 -1311813
    -283333 -283333 -283333
    -10000 -10000 -10000
    -1855500 -1892500 -1930375
    717632 823955 936569
    -215290 -247186 -280971
    502342 576768 655598
    283333 283333 283333
    -283333 -283333 -283333
    502342.00 576768.00 655598.00

    333906.00 346164.00 355284.00


    Criteria Planet Karaoke Pub
    Payback Period 2 Years 5 Months
    Discounted Payback 3 Years 1 Month
    Average Return on investment 30.36%
    Net Present Value
    Internal Rate of Return
    Beach Karaoke Pub
    3 Years 10 Months
    4 Years 3 Months
    20.32%

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