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Existing conditions The venue has Revenue of $11m per annum which is spread evenly over the year without any noticeable peaks or troughs Recurrent costs are 55% of revenue Option One Extend and

Existing conditions The venue has Revenue of $11m per annum, which is spread evenly over the year without any noticeable peaks or troughs. Recurrent costs are 55% of revenue. Option One Extend and renovate the existing gaming room and include improvements to meet current regulatory standards such as disability access and improved evacuation requirements and to replace aging air conditioning plant. The project will cost $9m in today’s prices and is expected to take twelve months. Payments will be made in accordance with a project payments schedule (5% at start, 10% 12months after completion of work and the balance in two equal payments at six months and 12 months). After touring similar projects the Steering Committee has notionally set aside a further $30,000 per month for changes to project scope during the project, this amount will not be included in the contract and may not be used, but the Steering Committee believes that to be financially prudent this sum should be included in all planning calculations of project cost. This option will increase annual revenue by 30% and costs will rise to 70% of the new revenue. This option has the advantage that there will be minimal disruption to operations and the new revenue and costs could be expected to start in year three. Option Two Build a new facility with improved gaming and other facilities on the existing site incorporating revised layout, new concepts of operation, and cost saving technology. The project is anticipated to take three years. The new facility will cost $15m which is to be paid to the builder as follows; 10% at start, 15% 12months after completion of work and the balance in three equal payments at end of Year One, the end of Year Two and the end of Year Three. Due to the different scope of the project, no contingency for changes to project scope is allowed for. The new facility is expected to increase revenue by 70% but because of efficiencies gained in the new design, costs will be reduced to 45% of revenue. At the end of the first year the operation will move into temporary facilities and revenue is expected to drop to 40% of current revenue until the new venue opens at the end of year Three. Assume ? Depreciation Life of 60 years using straight-line method ? Tax at a concessional rate of 25% of Profit. ? Project costs are not tax deductible

 

May 24 2020 View more View Less

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