Business Project of a Manor House Hotel at Chicago Region and Investment Choice to Be Made - Paper Example

In this case study, the business process decision which needs to be made is to start, own and manage a new business venture by Andre and Mellissa Barmore. The new project was a Manor House Hotel at Chicago region. Besides, there are some other investments decisions which would be made concerning the type of decor to be put and the lighting method to be embraced in the guestrooms as well as the entire hotel. Some of the options which are available include either to incorporate the incandescent light bulbs, compact fluorescent bulb and light emitting Diode bulb. In addition, the management decisions are also key and paramount to the operations of the partners during the management and operations of the hotel if at all it picks after the actual implementations.

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The Factors Considered Regarding the Cash flows

Some of the factors which they can consider include:

In regard to the cash flows the following factors were considered:

The exclusive use of the 60 Watt incandescent bulbs

Exclusive use of the 60-watt equivalent led bulbs

Exclusive use of the 60-watt equivalent CFC bulbs

Cost factors regarding present value of the future cash flows

Opportunity cost of capital and how it is determined

The opportunity cost of capital is the difference in the return on the investments between different types of bulbs. The cost of capital is determined by computing the returns of the investments cash inflow of each bulb option and determining the difference in their returns. These would give us the opportunity cost of capital. For example,

Costs IncadecentTwister CFL Led 19A Cost per bulb 0.41 4.47 12.97 Number of bulbs 650 650 650 Inflation rate 2% Total costs 266.5 2905.5 8430.5 Year 2015 2016 2017 2018 2019 2020 Totals

Incandescent Bulb 266.5 271.83 277.2666 282.8119 288.4682 294.2375 1681.114

Twister CFL 2905.5 2963.61 3022.882 3083.34 3145.007 3207.907 18328.25

Led 19A 8430.5 8599.11 8771.092 8946.514 9125.444 9307.953 53180.61

Pv for incandescent bulb $7,321.69 Pv of Twister CFL $79,824.29 Led 19A $231,615.44 In this case, the bulb which can be adopted is the incandescent bulb since it has the lowest present value of costs.The investment criteria to be used to choose the lighting bulbs

The choice of these bulbs should be based on cost, and the one which has a lower cost in terms of present values is to be chosen. The choice should not also compromise the standards of the hotels quality. The choice which causes less than 20000 dollars will be expensed rather than be depreciated within a given investments life.

Solution to the Investment Problem

To solve the problem above, I would take my time to define the problem clearly. In this case, I will take the time to define why the lighting why the lighting is a problem, define the taste and preferences and know which one is readily available in the market. Secondly, I shall identify and define the alternative paths which I could pursue and challenge the definitions at all dimensions. Thirdly, I will identify the possible solutions ( these include the use of various type of bulbs which include light emitting Diode Bulb, Compact Fluorescent bulbs, and Incandescent bulbs) making a priority over the potential solutions and eventually making viable decisions which can be used during the implementation process. After the decision is made, then the division of labor and specialization follows to see the implementation process through. The final stage is the evaluation to ascertain if the decision made has achieved the set objectives of the Manor Hotel either in the short or long-run.

References

Hanson S, G, Andersen, C & Heilprin J, (2013) Lighting the Way at the Manor House Hotel. Harvard Business School