Hatfield Forest Conservation Trust - Example

HATFIELD FOREST CONSERVATION TRUST Question Income and expenditure ment for Christopher’s proposal Expenses £(pounds) Stable conversion 60,000 Fish tank 7,000 Fish tank installation above 1,500 Fish tank installation below 12,000 Cycle track &assault course 8,000 Canoes, bikes and riffles 42,000 Maintenance of track course 5,000 Safety wear 4,000 Food 41,250 Alcohol 48,750 Fish restocking 11,250 Light, heat and telephone 10,000 Staff salaries 30,000 Cleaning 22,000 Laundry 8,000 Kitchen 38,000 Rose garden 15,000 Décor maintenance 18,000 Hall reception maintenance 8,000 Total £389,750 Revenues The Christopher’s proposal projects that the organization would be able to have an annual income of £750,000. From the above computation of expected annual expenditure, the organization would incur £ £389,750 Thus, Income - Expenditure = benefit or profit 750,000 – £389,750= £360,250 % profit = (360,250/389,750) 100% = 92.4% This implies that the proposal can yield good revenue from the Hatfield trust since the annual revenue exceeds the annual expenditure by almost 92.4%. Thus, it is a viable proposal in case it is implemented well. Question 2 Expected costs of 30 weeks piloting. Food 40×30 1,200 Electricity 4×30 120 Domestic Laundry, cleaning expenses 10×30 300 Use of minibus 12×30 360 Additional staff salary 15,900 Total Annual expenditure 17,880 Expected income Charges per person 145×30 =4350 Commercial charge 8,000-2,000 =6000 Minibus trips charge 20×30 =600 Charges per guest (10×150) 30 =45,000 Total revenue =55,950 Revenue – Expenditure 55,950 - 17,880 =38,070 Profit % = (38,070/17,880)100% =212.9% This proposal would yield a profit of about 212.9% This means that this is a viable business, the possibility of the project surviving after the piloting is very high. Thus, the board of management should not have doubts about John and Imogen’s project because it can fetch good revenues that can be used to expand its functions and even assist more disadvantaged individuals in the county of Essex. When we compare the two proposals Christopher’s and John’s, the later has moiré chances of surviving than the former proposal. This is because we have seen John and Imogen’s proposal shows that the organization would be able to yield over 200% profit when well implemented while Christopher’s proposal yield only 92%. This is crystal clear that the board should consider John and Imogen’s project because the organization would grow faster. From the financial terms, Christopher’ project seems to have bigger financial figures, however, in real sense it is not profitable s that of John and Imogen’s. Another point which the board should note is that Christopher’s proposal is not in line with the organization’s goals of conserving the natural environment. He suggests that some parts of the forest would be cleared to create space for the activities that ought to be launched. Cutting and clearing the natural trees would destabilize the ecological life of various organisms in this forest. Moreover, the activities which Christopher is proposing are quite many and would need more staff to be employed and more infrastructures meaning that the organization would have to incur additional costs in maintaining its functions. There are many factors the boards of management of any firm have to consider in making the decision of a particular firm. Important decisions such as trying to find which proposal to adopt like in this case study need good analysis of the all the factors before reaching a conclusion. All the expenditure and profitability elements have to be studied to find good differences of the facts in order for the wise decisions to be reached. Question 3 This project is meant to conserve the natural environment by carrying out good farming practices do not endanger the natural life o the animals and plants. The project is also meant to provide the local people with opportunities 0f enjoying the natural setting of the environment. Moreover, the project aims to teach the young population of Essex County on how to take care of the wildlife in the local surroundings. In overall, the project focuses on the environmental conservation by not only protecting the ecosystems from being degraded by man’s activities. But also equipping the population with the necessary skills and showing them the importance of doing so. Christopher’s proposal is a good idea since he proposes to increase the service delivery of this project to create more income for this trust foundation. He proposed that the hall and its grounds be used to offer residential outdoor courses for the business executives who are always busy and want to get a bit of relaxation. He explained that the place would be a beehive of activities where activities such as mountain hiking, fishing, clay shooting and canoeing would take place. Indeed, these are good relaxations activities which are very easy to organize by the management and a lot of cash can be fetched from such activities. And the money can be used to facilitate other functions of the organizations. However, the proposal seems to go against the aims of the organization. As mentioned earlier, the main focus of the Hatfield trust foundation is to conserve the environment but most of the activities that Christopher suggested require that more space should be created by cutting down the trees to create the grounds where these sporting activities can take place. This means that the focus of the organization would shift from conserving the surroundings to profit making an organization. It is true that when the activities suggested are implemented, the organization would receive more revenue, however; there would be negative interference with the ecological life. John and Imogen’s proposal is another good proposal that when implemented can improve the organization’s revenue. At the start of the case study, we have been told that Hatfield trust is a charitable organization taking care of the environmental issues. The proposal which John and Imogen have proposal seems to be a little bit out of the focus of the main objectives of the organization but still lies in charitable activities. Assisting the disadvantaged in the society to learn more issues that affect their life is a good idea. Teaching these people on life skills and some of the ways of taking care of the surroundings is quite good. When these disadvantaged individuals get trained on some of the life skills, they will find a reason why there is a need for environmental conservation. In the long run, the organization would be assisted by these individuals to conserve the environment since they would be equipped with necessary skills on how to do it. One problem with this proposal is that the project seems ambitious since it would require a lot of initial capital to run. Dealing with disadvantaged means giving those free services thus, the organization needs to dig deep into its pockets to make this project sustainable. In a real sense, the project is not viable since the organization has little sources of income that cannot support such an ambitious project. Another reason why this project seems unrealistic is that the number of expected disadvantaged people who should come for the courses can be very low. And even some might be unwilling to come and enroll. There when a lot of resources are used to initiate this project and the expected beneficiaries do not show up, then the organization would run at a loss. From the cases study, we find that the proposers of this proposal doubt the sources of capital they would use to initiate the project. This means that the project is already strenuous to the organization. There are several criteria which the board of management should use to ascertain on which proposal between the two is viable and will preserve the overall goals of the organization (Hardina, Ari jendian & Garoupa white, 2015: p11). The first criteria as discussed is which proposal is would preserve the goals and objectives of the organization of conserving the environment. Both proposals might be good, but one of them may go against the principles and the values on which this organization was formed. Therefore, the board has the task of scrutinizing the pros and cons of each proposal in reference to the organizations; goals and objectives. A proposal that scores high basing on this criterion would be the right proposal to implement. The second criteria that should be used by the board is calculating the basic methods of capital investment appraisal. One of the methods that can enable the board to make the decision is simple payback method. This means the board should settle on a proposal that would pay back the capital used to initiate the project within the shortest time possible. Thus, the board should check the payback time for both Christopher and John’s proposals to choose the proposal that would pay back the capital invested. In other words, the project that would breakeven faster is more preferable. Still under capital investment appraisal method we have the accounting rate of return (ARR) as a criterion (Debarrshi 2011: p21). ARR is the average net benefit of the project divided by the capital invested in the project. A proposal that has high ARR should be preferred than that one that has a lower ARR. Moreover, the board should check o the discount rate or internal rate of return (IRR) of each of the proposal. A proposal that has a highest internal rate of return should be chosen over that one that has a lower IRR (Debarrshi 2011: p42). The last criterion on in financial terms is considering the net present value of each of the proposal when implemented. Both parties who have given their proposals have shown both revenues and expenditures, therefore, it is possible to find the net present value (NPV) of both proposals (Hardina, Ari jendian & Garoupa white, 2015: p34). The board is supposed to pick the proposal that would result to high NPV. On ethical consideration, John and Imogen’s proposal sounds better than Christopher’s proposal. It is ethical for any organization to practice corporate social responsibility to the community where the organization is located. This means that organization such as Hatfield should initiate some projects that are geared to uplift the standard of life of the local community. Offering course for the disadvantaged in the community is a good idea which falls under ethical consideration through corporate social responsibility. Nevertheless, Christopher’s proposal has little ethical consideration because the activities proposed are just means to expand the revenue for the organization and even the proposal is meant to distort the natural surroundings to create room for these activities. Conclusion The above case study has got two proposals; the proposal presented by Christopher seems to be ambitious since it aims to widen the scope of Hatfield trust in terms of income generation. The project when adopted by the management would make this organization a beehive of activities. However, when compared to the proposal of John and Imogen, the later is very viable because it will require little capital to start and the projected profits are high. In addition, John and Imogen’s proposal is in line with the Hatfield’s goals of protecting the ecological life. Therefore, the board should consider this fact as a fundamental fact when making the decision on which proposal to adopt. 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