Case ID: 909B05
Solution ID: 115
Words: 1552
Price $ 75

Spikes Indoor Beach Volleyball and Rock Climbing Inc Case Solution

Case Solution

This is a segment of the subdivision of Ivey cases and technical notes drafted for Introductory-Level courses. The proprietor of indoor beach volleyball and rock climbing leisureservice in London, Ontario, is contemplating growing via the addition of a rooftop patio and a court dedicated to outdoor beach volleyball. Students are required to complete a business size-up and to assess the growth in detail, beyond the quantitative nature. Students are required to list all the cash flows related with the growth and categorize them as important (cash, future and different), repetitive or single-time costs. When this task is done, students will be required to complete a differential analysis, along with a sensitivity analysis, where needed, to calculate the return on investment and to find out the payback time. lastly, students will be required to come to a final decision regarding the advisability of going ahead with the growth.

Excel Calculations

Cash Flow Analysis 

Total Cash Flows

Terminal Value

NPV @ WACC

IRR

Data and Assumptions

Capital Expenditure for Expansion

Incremenetal Revenues for Expansion

Incremenetal Expenses for Expansion

Payback Period

Inventory

Questions Covered

Perform a business size-up.

Analyze the expansion qualitatively.

List all the cash flows associated with the expansion, and classify them as relevant (cash, future and different), recurring or one-time costs.

Perform a differential analysis, with sensitivity analysis where necessary. What is the return on investment? What is the payback period?

As Earl Misener, would you go ahead with the expansion? CASH FLOW RELEVANT? RECURRING OR ONE TIME? Incremental bar revenue Incremental food revenue Additional league fees Beverage COGS Food COGS 5 days food inventory 5 days liquor inventory Accounts payable Accounts receivable Servers Bartender Cooks Maintenance Utilities Insurance Nets and balls Retaining wall/fencing Zoning and permits Stairway Patio furniture Washroom Amortization Bank loan Interest