Case Analysis

6978 Words Jul 15th, 2015 28 Pages
Case 1
Riverside Leisure Centre

Introduction
The Riverside leisure centre was opened in 1973 with a leisure pool, sports hall, 4 squash courts and changing rooms. June West is the new and very ambitious manager.

Squash courts 1 and 2 have been recently refurbished and are fully booked most of the day. The other two squash courts next to the fitness room are now in urgent need of repair and are rarely booked.

The fitness room is too small. It is clear that the leisure centre is losing members because the fitness room is too busy. Other leisure centres locally are reporting a big increase in membership of their fitness rooms.

June believes it is important to increase the size of the fitness room by incorporating one or both of the
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Probability %
I - The fitness room will be an initial success but too few new members will be attracted. Usage will vary throughout the year.
P 210,000
20%
II - The fitness room will be very successful initially but then membership will slowly fall. Usage will be seasonal.
P 225,000
50%
III - The fitness room will be very successful. A lot of new members will be attracted and as existing members become more health conscious they will use the room throughout the year.
P 250,000
30%

Alternative 2
State of World
Total annual revenue for the fitness room.
Probability %
I - The fitness room will be an initial success but too few new members will be attracted. Usage will vary throughout the year.
P 240,000
50%
II - The fitness room will be very successful initially but then membership will slowly fall. Usage will be seasonal.
P 250,000
40%
III - The fitness room will be very successful. A lot of new members will be attracted and as existing members become more health conscious they will use the room throughout the year.
P 270,000
10%

(The additional revenue equals the total revenue calculated above less the existing revenue of P 180,000).

Cost of capital

Laura suggests that it is appropriate to use a cost of capital of 7% for this project.

Other related information from Laura

Laura wants the following information to be considered.

(1) Both squash courts 3 and 4 are in urgent need of

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