QUESTION $4$

DUKU AND ASSOCIATES $-$ TIME FOR CONCENTRIC DIVERSIFICATION

Duku & Associates of Obuasi have been appointed by Bui Power Authority for the management of a four$-$star hotel, Bui Resort. The management of Bui Power Authority has requested Duku & Associates to submit a management proposal for running the hotel. It is expected that the proposal will include estimates for revenue receipts and operating expenses to enable the management of the owners of the Bui Resort take a decision on the working capital to be approved and incorporated in the Management Contract. You have been appointed by Duku & Associates to manage this asset. It is incumbent on you to provide estimates for the next six $(6)$ years. You have been provided with data as the base information for the preparation of revenue receipts and operating expenses of a similar business in the same industry. Based on capacity utilization of the hotel, it is anticipated that the revenue receipts will grow at an average rate of $12\%$ per annum for the first two $(2)$ years, and thereafter, at $10\%$ for year three $(3)$ to five $(5).$ Year six$(6)$ would slide to $8\%.$ Duku & Associates in association with other hospitality experts who have been managing Anglo Gold

Ashanti Club Houses and Lancaster and Holiday Inn facilities, have indicated that the operating expenses of managing such a resort will grow at an average rate of $4\%$ per annum for the first four years, and thereafter, grow at the rate of $10\%$ for years five $(5)$ and six $(6).$ Based on the information provided above, you are required to prepare the cost estimates from year $1$ to year $6$ to support the proposal to be incorporated in the management contract.

Use the framework below to simplify your work.