Glory Mountain Ski Area Case Solution
1 Financial Management For Public, Health, And Not-For-Profit Organizations, 7th Ed. © Sage CQ 2023
Q1: Flexible Budget - Inputs Average Ticket Revenue 45% $ 60.00
% of Total Skiers
Weekend Skiers Midweek Skiers Skier Lessons Expected days of Operation Expected Skier Days State Subsidy Average Food Purchases Food Costs as % of Food Revenue Central Management Salaries Benefits as % of Salaries Annual Energy Costs Daily Insurance Cost Flexible %
55% $ 10% $ 130 292,500
80.00
$ 2,000,000 $
4.00
40%
$ 1,800,000
30%
$ 2,240,000 $
15,000
-5%
Number
Instructors & Ski Patrol Lift Attendants, Maintenance & Grooming Kitchen Staff Equipment & Fuel Costs
45.00
275 140 50 60
Days Worked
100 130 130 130
Hours Worked
Hourly Wage 7 $ 20.00
10 $ 8 $ 6 $
Financial Management For Public, Health, And Not-For-Profit Organizations, 7th Ed. © Sage CQ 2023
18.00 12.00 65.00
2
Q1: Flexibl e Budget
Revenue Lift Ticket Sales Weekend Skiers Midweek Skiers Lessons Food Sales State Subsidy Total Revenue Expenses Salaries Management Salaries Instructors & Ski Patrol Attendants, Maintenance & Grooming Kitchen Staff Total Salaries Benefits Total Salaries & Benefits Other Operating Expenses Fuel & Equipment Costs Energy Insurance Food Costs Total Other Operating Expenses
Base Budget $ 7,897,500
7,239,375 2,340,000 1,170,000
Minus 5%
$
F or V
V V V V F
7,502,625
6,877,406 2,223,000 1,111,500
2,000,000
2,000,000
$20,646,875
$ 19,714,531
$ 1,800,000
$
1,800,000
F V F F
2,865,000
2,807,250
Partial V
$12,415,000
$ 12,164,750
$ 3,042,000
$
3,850,000 3,276,000 624,000 9,550,000
2,240,000 1,950,000
3,657,500 3,276,000 624,000 9,357,500
3,042,000
2,240,000 1,950,000
468,000
444,600
$7,700,000
$7,676,600
Total Expenses
$20,115,000
$ 19,841,350
Profit/(Loss)
$
$
531,875
(126,819)
Financial Management For Public, Health, And Not-For-Profit Organizations, 7th Ed. © Sage CQ 2023
F F F V
3
Q2: Wind Turbine (NPV)
Should the State install the turbine? PV = PV(rate , nper, pmt, fv, type)
Cost of Maintenance (FV) Year of Maintenance (N) Cost of Capital (I) PV of Maintenance Outflows Acquisition Cost Total PV of Cash Outflows
$
750,000
$
(437,618)
Annual Energy Savings (PMT) Useful Life (N) Cost of Capital (I) PV of Power Savings' Inflow Annuity
$
7 8.0%
$ (4,100,000) $ (4,537,618) 560,000
15
8% $ 4,793,308
NPV = PV of Inflow s - PV of Outflows
Net Present Value
$
255,690
4 Financial Management For Public, Health, And Not-For-Profit Organizations, 7th Ed. © Sage CQ 2023
Q3: Snowmaking
Step 1: Find Net Present Cost Big-Mouth
Acquisition Cost
$
850,000
Whisper Quiet $ 600,000
PV = PV(rate, nper, pmt, fv, type)
Annual Operating Cost (PMT) Useful Life (N) Cost of Capital (I) Present Value of Operating Annuity
$
35,000
15
$
50,000
10
8% $
299,582
8% $
335,504
Net Present Cost = PV of the Annuity + Acquisition Cost
Net Present Cost
$ 1,149,582
$
935,504 5
Financial Management For Public, Health, And Not-For-Profit Organizations, 7th Ed. © Sage CQ 2023