Case 7 The City Hotel Recovery Analysis

CASE 7 4

Case7: The City Hotel Recovery Analysis

Case7: The City Hotel Recovery Analysis

TO:City Hotel Management

FROM:Student Name

December 21, 2014

SUBJECT:City Hotel Debt Recovery Analysis

Workingcapital is critical for success in today’s fast-paced businessenvironment. Despite reporting higher revenues than expenditure onoperations, City Hotel’s working capital health is dented by itsefforts to pay annual dues on a construction loan (Monk, Brady &ampCook, 2014). The hotel is unable to make these loan payments withoutthe help of the city government, a fact that has serious implicationsfor the entity’s business health. This analysis provides a fouryear outlook of the hotel’s working capital debt owed in an attemptto point out a favorable business scenario for decision making.

ScenarioAnalysis

Table1 below presents a summary of the four scenarios used in theanalysis. The “Total” column presents the sum of the debt owed atthe end of the four year period for each of the scenarios, assumingno payments are made during the first three periods.

Table 1: Projected amount of working capital debt owed to citygovernment

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Scenario

2015

2016

2017

2018

Total

End-of-year Working Capital Debt Owed to city government

No change

$14,447,719

$13,167,723

$11,963,160

$10,740,711

$50,319,313

Rent rooms

$13,933,319

$12,646,636

$11,431,911

$10,199,103

$48,210,969

Sell time shares

$14,065,339

$12,379,965

$10,748,129

$9,078,597

$46,272,030

Do both

$13,550,939

$11,858,877

$10,216,880

$8,536,989

$44,163,685

Whereasthe general trend indicates a reduction in debt owed from 2015 to2018, the fourth scenario provides the hotel with an opportunity topay the minimal debt. If the hotel rents out 50 units to the collegein 2015 and sells 10 units to the time-share company in each of thefour years, it will be able to reduce the debt to the lowest possiblevalue. These results imply that the hotel should opt for this optionto obtain the best results over the four-year period.

Attachments:Microsoft Excel Decision Support System

References

Monk,F. E., Brady, A. J., &amp Cook, S. G. (Eds.). (2014). ProblemSolving Cases in Microsoft Access and Excel.New York: Cengage Learning.