Bila Project – Finance Management Assignment Help

Hi Can you please help me in to do this assignment, is like a project Bila is a sovereign country with a tropical / sub-tropical climate. It is fortunate in that it has a coast that provides both breath-taking views and peaceful, secluded inlets. Its landmass includes a high mountain range, where there are areas of temperate climate. In several locations, the mountain range meets the sea, and in these locations there is luxurious tropical rainforest. Not only is Bila fortunate with its geography, but it enjoys a strong economic climate. Politically, it is stable and its citizens have a good standard of living. From a business perspective, companies are regulated appropriately, but there is room for innovation and entrepreneurship.

Bila has a strong currency – the Bila Dollar (NVD$). The Bila banking system is robust, with six major banks operating in the country. Inflation for the past ten years has averaged 2.8%. Bila corporate income tax rate is 20%. There is no capital gains tax. Halcyon Resorts Pty. Ltd., trading as Halcyon, is a private company incorporated in Bila. Halcyon’s core business is that of small, intimate and discreet resorts. At present Halcyon has five resorts in Bila.

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Three of these resorts are in mountain locations, and the other two are at secluded beaches. All accommodation at all resorts is provided in private villas, appropriate for no more than two people. Each individual villa is luxuriously appointed with full room service available 7am to 11pm, and limited room service available between 11pm and 7am. Halcyon’s resorts are in high demand, and as a result Halcyon has been able to institute a stringent reservation policy. Each villa can be taken for a weekend (Friday evening to Monday morning) or mid-week (Monday evening to Friday morning). Whilst many of Halcyon’s guests are looking for a restful holiday, each resort does provide some opportunities for adventure and escape. These opportunities are provided by a third party, with Halcyon taking the bookings, and receiving a percentage of the payment as a booking fee. Halcyon is now considering expanding to include a sixth resort. It has undertaken an initial feasibility study, investigating two options. This study has cost NVD$100,000. The first option is a resort on a cliff top with breathtaking ocean views. The second option is for a hideaway within a tropical rain forest.

For both properties, there are existing establishments that Halcyon could refurbish to its very high standard. Halcyon would need to purchase the land and existing buildings for each option. Because of the need for intensive involvement of senior management in setting up a new resort, Halcyon has determined that it can undertake only one of these options. Whichever option is chosen, Halcyon has established that it will borrow NVD$20 million. It will be able to borrow these funds at 7.5% per annum, compounding monthly. Your team is a consulting company. Halcyon has commissioned your consulting company to provide financial analysis for both options, and to provide a recommendation based on this analysis. As well, Halcyon senior management have recognized that their knowledge and understanding of key finance ideas needs refreshment and they require an explanation, in simple English, of these ideas. Your explanation of key financial ideas, your analysis and your recommendation are to be presented in a written report. General Information Management required The level of senior management at each existing resort is as follows: a full time onsite manager, fulltime deputy manager, a full time evening manager, and a part time deputy evening manager. The full time onsite manager, the deputy manager and the full time evening manager work 5 days / nights per week. The part time deputy evening manager works 2 nights per week. All staff are entitled to four weeks annual leave. As there must be a manager on duty at all times, it may be necessary to take on agency staff on a short term basis to fill short term vacancies for these roles. It is expected that these arrangements for managers will be needed at any new resort. Seasonal demand For Bila, from a hospitality perspective, there are three types of demand – high, medium and low. Each week of the year can be classified as one of these demand levels. In a calendar year, there are 10 weeks of high demand, 26 weeks of medium demand and 16 weeks that are classed as low demand. Average occupancy rates are known for existing Halcyon resorts, as set out in the table below: High demand Medium demand Low demand Average occupancy 90% 82% 68% For all existing Halcyon resorts, there is extensive information known about the costs for food and beverage services, including all labour costs associated with these services. Some of this information is set out in the table immediately below: Food & beverage service High demand Medium demand Low demand Costs of food and beverage service as a percentage of food and beverage income 70% 73% 75% Details for options The cliff top resort will have 20 villas. The rain forest resort will have 30 villas. Information from feasibility study The feasibility study has provided the following information. (All costs given are as at November 1 2015.) Indicative salaries (all amounts are NVD$): Full time manager $120,000 per annum Deputy manager $ 90,000 per annum Full time night manager $100,000 per annum Part time night manager $ 40,000 per annum Agency staff – manager $100 per hour   Data regarding the two options: Cliff top resort Rain forest resort Purchase price Land value $7.5 million Buildings $6.0 million Furniture and Equipment $4.4 million Land value $6 million Buildings $7.0 million Furniture and Equipment $5.0 million Renovation of buildings (not including painting, flooring and soft furnishings) $2.1 million $2.0 million (Bila taxation law states that building renovation costs are to be capitalised) Initial refurbishment costs (soft furnishings, flooring and painting) $750,000 $900,000 (above costs can be expensed immediately Maximum accommodation charge per villa per weekend session $4,300 – high season $4,150 – medium season $3,500 – low season $4,150 – high season $3,750 – medium season $3,000 – low season Maximum accommodation charge per villa per weekday session $4,200 – high season $4,000 – medium season $3,500 – low season $3,900 – high season $3,450 – medium season $3,000 – low season Food and beverage services Average spend of $650 per villa per reservation. Average spend of $680 per villa per reservation. Commission on adventure activities Commission rate of 4%. Average spend of $200 per villa per reservation. Commission rate of 4%. Average spend of $250 per villa per reservation. Fixed costs per year* $2.5 million $4.5 million Variable cost per villa per weekend session* $160 $150 Variable cost per villa per weekday session* $170 $160 Need for refurbishment (new soft furnishings, new flooring, painting) Every 6 years Every 5 years Horizon It is expected that the property will be held for 12 years and then sold. It is expected that the property will be held for 15 years and then sold. *these costs exclude managerial salary costs, food and beverage costs and depreciation expenses   Bila’s Economic Bureau has provided the following economic indicators: The inflation rate for household items over the past 10 years: 2.8% per annum The index for costs in the hospitality sector (the hospitality index) has averaged 3.1% per annum over the past 8 years. The property index for Bila urban areas has averaged 2.7% over the past 10 years. The property index for Bila non-urban areas has averaged 2.5% over the past 10 years. The Bila Taxation Office provides the following depreciation schedules: Buildings – over 25 years Furniture and equipment – over 8 years Taxation law in Bila provides for income tax to be paid on gains associated with sale of capital items, and for an income tax rebate to be paid on losses associated with the sale of capital items. Halcyon Pty Ltd has previously been using a discount rate of 9%. However this discount rate may be inappropriate. An excerpt for Halcyon’s Balance Sheet as at 30 June 2015 is set out below. Limited balance sheet Assets $180 million Debt $ 55 million Equity $125 million. The debt consists of a mortgage of $45 million on properties at 8.1% per annum compounding quarterly, and an interest only loan at an effective annual rate of 6.7% per annum From previous consulting work for the resort sector, and taking into account the proposed borrowings, you have already estimated Halcyon’s beta as 1.2 Short term treasury securities are currently selling at a yield of 3% per annum. The market risk premium is estimated as 9% Both options can be considered replacement projects.


  • Assume all income and expenses are recognized in the year in which the respective items occur.
  • Assume the tax cash flow (payable or saving) occurs at the end of the year in which the tax income and expenses are recognized.
  • Assume all income and expenses are indexed unless advised or implied otherwise.
  • You will need to estimate the discount rate (required rate of return) rounded to the nearest 1% per annum allowing for the effect of gearing to finance the selected project. Assignment requirements The assignment is to be presented as a business report from a consulting company to the commissioning company containing:
  • Page numbering
  • Informative heading and sub-headings
  • Numbered sections
  • Labelled graphs and tables (if used)
  • Executive summary
  • Table of contents The assignment is to be referenced using Harvard style referencing (author-date). The report should use a font / fonts suitable for business communication. Assessment breakdown: Statement of business problem Explanation of finance ideas Quality of assumptions Analysis of both proposals Recommendation Executive summary Quality of business writing Overall presentation / visual appeal Referencing Meets specified requirements

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