The management of the Rolling Hills Golf Club (RHGC) is presently considering two potential projects to upgrade
Question:
The management of the Rolling Hills Golf Club (RHGC) is presently considering two potential projects to upgrade its facilities, namely:
1. A major upgrade to its Information Technology system, including the necessary hardware and software for the latest point‐of‐sale system and a significantly enhanced capacity for online sales. The estimated purchase cost is $75,000, with an estimated ongoing IT support expenditure of $5,000 required each year.
2. Build an undercover driving range with state‐of‐the‐art facilities including conference facilities and function rooms, and enhanced access for a broader demographic of golfers such as the physically challenged, the elderly and the indigenous.
While the first project is smaller, more defined and can be costed with relative precision, this is not the case for the second project. As such, the Board has approached your group for assistance on the following matters.
1. Should the Club pursue the IT upgrade? It is keen to pursue the project and clearly has financial resources to do so, but does not yet have a clear sense of the costs and benefits of doing so and requires greater clarity in this regard. Assume the estimated costs indicated above are relatively accurate.
2. The Club is also keen to pursue the development of the driving range, but is uncertain as to: (i) how much it can/should spend on such a development; or (ii) how it should be financed. In providing the above advice, you should consider the costs, benefits and risks associated with each project, over both the short and medium term. In advising the club on the driving range project, your advice should be supported by a solid analysis of the Club’s financial position and recent financial performance. Your advice should also be provided based on what you believe to be the best ‘fit’ with the core values and key focus areas of the Club and should also consider any broader trends relevant to the industry. Note, in undertaking these tasks, discounted cash flow calculations are not required as we have not covered this technique in this subject.
Required:
Provide advice in the form of a business case. While you have considerable flexibility regarding the structure of the business case, your submission should include sections typically contained in such documents including: (i) Executive Summary; (ii) Background; (iii) Analysis; and (iv) Key Recommendations. In preparing your business case, where possible, support your views with reference to calculations and any other appropriate supporting evidence. If you feel that your advice is limited in any way, identify the limitations. The remainder of this document contains additional information to assist you in this task.
The mark allocation is as follows:
30%; Part 2: 60%. 10% of your result will be allocated to formatting and presentation.