Basis of Preparation
This appraisal has been prepared in order to provide Prestigious Hotel Group with the
potential financial implications and investment returns arising from the proposed
solution.
It is based upon a number of stages that together provide an assessment of the
investment returns likely to be delivered as a result of project acceptance. It compares
specific, identifiable financial returns that arise against the cost of this solution.
This assessment is based upon information and explanation from Prestigious Hotel
Group and is indicative only. It is therefore not a part of the contractual offer from
Major Telecoms Company.
Payback
This is a comparison of the initial outlay of monies, to buy equipment or
services, against the time taken for the savings to cover the initial outlay. This
24/01/2005
Cost
Month
700000
700000
Monthly Costs
Cost Type
Cost
Months
175000
1-60
175000
The monthly cost figure is based on a comparison with a similar contract for another
hotel chain.
Benefits Evaluation
Selection of the savings / benefits modules arising supporting this appraisal :-
7668
2500
19170000
2.5
30
143775
12-60
Based on figures from the annual report - 65% occupancy i.e. 20 days per month,
revenue per $125/customer/day. Equivalent to $2,500 per month. Start month set to
12 based on roll out of datacentres and new services to hotels.
24/01/2005
2500
2.5
30
1875
168750
438750
708750
35625
12-48
Centralising the applications of the Group's separate hotel transforms them into a
global hotel with greater opportunities for upselling and cross-selling. A very
conservative view was taken based on the diverse geographical location of the hotels
with the effect on the increased number of customers being realised after 12months.
240000000
45
46
30
126098
12-60
Benefit
Month
Consolidation assessment
50000
50000
24/01/2005
Benefits Summary
Improve Revenue per Customer
143775
35625
126098
305498
50000
60
700000
50000
305498
175000
10
NPV ($)
24/01/2005
1723489
-650000
Year 1
Year 2
Year 3
Year 4
Year 5
Month 1
-173616
-15798
53362
110527
108987
Month 2
-172242
-9535
58561
114799
111579
Month 3
-170879
-3365
63678
119000
114125
Month 4
-169528
2710
68713
123132
116626
Month 5
-168186
8693
73668
127193
119083
Month 6
-166856
14585
78544
131185
121498
Month 7
-165536
20388
83341
135109
123869
Month 8
-164226
26100
88060
138965
126198
Month 9
-162927
31725
92703
142756
128484
Month 10
-161638
37262
97271
146480
130730
Month 11
-160360
42714
101763
150140
132935
Month 12
-22157
48080
106181
153735
135099
Total
1723489
IRR Calculation
Period (months)
60
700000
50000
305498
175000
IRR %
24/01/2005
29.6
-650000
Year 1
Year 2
Year 3
Year 4
Year 5
Month 1
-171257
-13224
37907
66630
55756
Month 2
-167594
-7873
41036
68266
56307
Month 3
-164009
-2741
44014
69803
56809
Month 4
-160501
2177
46850
71245
57265
Month 5
-157068
6890
49546
72595
57678
Month 6
-153709
11402
52107
73856
58048
Month 7
-150421
15722
54539
75032
58377
Month 8
-147204
19854
56844
76125
58666
Month 9
-144055
23804
59028
77139
58918
Month 10
-140974
27579
61095
78076
59133
Month 11
-137959
31185
63048
78940
59313
Month 12
-18803
34625
64892
79732
59460
Total
Negl.
Payback Calculation
Cash costs of solution
700000
50000
305498
175000
Payback (months)
24/01/2005
42.75
700000
175000
60
305498
50000
1723489
29.6
42.75
10%
24/01/2005