Business Research Results - Report Example

A Report on the Results Name Institution A Report on the Results Introduction Making decisions on business expansions may, sometimes, call for a critical process that will assess the possibility of a gain or loss in case the expansion is considered or assumed. In this case, Country Inn is a family owned and operated business, which offers the best paradigm and platform on which business should consider various factors before implementing any expansion. The family is said to own an adjoining 5900 square meter parcel of land on which it intends to build a new wing as well as a parking lot on the same land. The family has various reasons to facilitate the expansion. Preliminarily, the entire area is popular with vacationers thereby providing an assurance of a substantial occupancy rate. In addition, the entire restaurant is so large thereby leaving many seats unoccupied. This means that adding an extra wing will only increase the restaurant patrons. The following scenario gives the constraints along which the owner’s decision is limited to. Scenario 1. The family expects that at least 5850 square meters of land will be used and its primary intention is to build a new wing that will carry not more than thirty units but should at least have 25 units. The units should at least have 5 double, 10 family and 10 single units. 2. Another alternative is to purchase a parcel of land in which a pool will find its place. The pool’s maintenance cost for the next ten years is approximated to be $1550000. The need for a parking lot and extra space pragmatically reduces the new wing are to 5600 square meters providing a probability of at least a covered area of around 5540 square meters. Process Followed The analysis process utilized the efficiency of the spread sheets in providing the accurate computed figures that helps in reaching a reliable decision in the end. Both the base and the extension case provide the analysis in terms of calculated figures that avail the details concerned with the situation. Base case Objective Cell (Max) Cell Name Original Value Final Value $B$34 NET INCOME AFTER TAX TOTAL SQUARE METERS $ 3,116,320.75 $ 3,843,059.70 Variable Cells Cell Name Original Value Final Value Integer $B$3 NUMBER OF SINGLE 10 10 Integer $B$4 NUMBER OF DOUBLE 5 7 Integer $B$5 NUMBER OF FAMILY 10 13 Integer With assumption of adding a new wing, the base wing report indicates that the projected income after 10 years will be $3843059.70. However, the model strongly suggests that, with inclusion of the new wing, the family units should be 13, double units should be 7 and the single ones should be 10. Such considerations is said to yield the above approximated income for the next ten years. Extension case Objective Cell (Max) Cell Name Original Value Final Value $B$35 NET INCOME AFTER TAX TOTAL SQUARE METERS $ 3,344,723.75 $ 4,330,913.50 Variable Cells Cell Name Original Value Final Value Integer $B$3 NUMBER OF SINGLE 10 11 Integer $B$4 NUMBER OF DOUBLE 5 8 Integer $B$5 NUMBER OF FAMILY 10 11 Integer Considering the addition of the new wing, the extension report clearly indicates that Country Inn will stand to earn $4330913.50 after ten years if the number of double, including the ones under the new wing, will be raised to 8 units, the number of single should go up by one extra unit while the family units should be increased by one (Dodson, Prinzmetal & Shimamura, 1998). The extended case further provides fine adjustments such as addition of the swimming pool as it is indicated in the extension report. INCOME STATEMENT (base case) Total unit and restaurant revenue $ 16754400 Total unit construction and maintenance cost $ 8738075 Total restaurant cost $ 3,365,100.00 Total cost of goods $ 12103175 Income before tax $ 4651225 Income tax expense $ 1534904.25 Net income after tax deductions $ 3116320.75 Based on the tabulated figures above, it is evident that there is a rise in terms of revenue due to increased occupancy rates. The additional units due to the newly introduced wing seem to have brought a big change in terms of the revenue received by the Country Inn. The restaurant revenue mounts to$ 16754400, which is direct indicator of the impact brought by the changes made on the piece of land. However, the costs are still on the rise since the construction and maintenance costs records a figure standing at $8738075. This still indicates that the new decision will be accompanied by a rise in terms of the costs realized in funding the maintenance services. The net income, which settles at $3116320.75, reflects on the desirable amount of revenues that surpasses the tax deductions thereby channeling profits to the entire organization. INCOME STATEMENT (extension case) Total unit and restaurant revenue $ 20970000 Total unit construction and maintenance cost $ 9024700.00 Total restaurant cost $ 5041800.00 Total parking lot construction $ 1911375.00 Income before tax $ 4992125.00 Income tax expense $ 1647401.25 Net income after tax deductions $ 3344723.75 Considering the tabulated figures based on the extension case report, the restaurant revenue mounts to $20970000, while the construction and maintenance costs goes up to $ 9024700.00. Comparing the two values with the ones from the base case report, it is worth noting that there is a rise in both the revenues and the construction and maintenance cost. The income tax expense registers a computed amount of $ 1647401.25. This leads to a pragmatic reduction of the total revenues to $ 3344723.75. The increase in taxes is as a result of the investment expansion. Investment made in construction of the new wing as well as the swimming pool seem to have developed a significant positive impact on the occupancy rates as well as the number of patrons. This further staged an enhanced source of revenue, which indicates a higher figure compared to the one recorded under the base case report (Cahill & Kosicki, 2000). The ultimate consideration of the number of units seem to be less significant as the swimming pool stands in as an attractive feature that boosts the occupancy Rate under the extension scheme compared to the base scheme. Comparison case Base Case Extension Case Single 10 11 Double 7 8 Family 13 11 Net Income 3843059.7 4330913.5 726738.95 986189.75 Recommendation Utilization of excel solver has relevantly created a comparison platform that helps in reaching the best decision and the best choice to be reached between the base case and the extension case. Focusing on the extension case, it can be concluded that the choice will be accompanied by extra maintenance costs and construction expenses. There will be further increase in terms of the costs to be met for the electricity consumption. The ultimate construction of the new wing and the swimming pool still creates avenues for extra expenditure thereby raising the total costs (Savitz, 2003). Despite the additional costs, the swimming pool, for example, stands in as an attractive feature, which entertains most of the clients. This will subsequently attract more customers in the premise, which results in increased occupancy rates. Following alterations made in terms of construction, the extension case provides a costly but a better platform that can be used in generating more revenues for Country Inn. This means that choosing on the extension case seems to be a better alternative given the fact that the revenues generated are relatively high. Considering tourism attraction strategy formulation, the extension case is much flexible in accommodating such strategies aimed at boosting the performance of the premise. This will not only make the firm profitable but also ensuring that the premise is more stable in facing competition challenges. Conclusion Financial management is a critical case that should be taken into consideration especially when it comes to selecting essential strategies. This is to facilitate desirable expansion as well as the growth of an organization as a result of good planning. Based on both the base and extension case, the two have been seen carrying positive impacts to Country Inn performance (Moore, 1998). The extension case, however, seem to be an excellent alternative given the fact that the option is much profitable. Putting into consideration the economic factors, business operators are urged to assess and analyze better options that will foster the success of the entire business. References Dodson, C. S., Prinzmetal, W., & Shimamura, A. P. (1998). Using Excel to estimate parameters from observed data: An example from source memory data. Behavior Research Methods, Instruments, & Computers, 30(3), 517-526. Cahill, M., & Kosicki, G. (2000). Exploring economic models using excel. Southern Economic Journal, 770-792. Moore, D. (1998). Analysis skills for production strategies: The use of buildability and systems tools. Oxford: Chandos. Savitz, D. A. (2003). Interpreting epidemiologic evidence: Strategies for study design and analysis. 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