SCIENCE ASSIGNMENT(NO PLAGIARISM, A++ WORK, QUALITY, ON TIME)

Week 8

FINAL PROJECT – SPORTS FINANCE PRESENTATION

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Instructions
The major U.S. city has recently had a vote to determine if the citizens want a professional sports team to move to their city, and if they are willing to have a one-cent tax increase to support the cost of such a project. The vote was "Yes" by a large majority. You are the vice president of finance for a consulting firm that has been hired by the city's mayor and city council to give them a detailed analysis of what it would take to entice a professional team to move to their city. You are a member of the five person team that will conduct the analysis and make a presentation to the mayor and city council. Your responsibility is to provide the financial analysis for the project which includes the construction of a sports venue to accommodate the team. The final project for this class is a detailed multimedia presentation of your financial analysis. This is an extensive project which you have been working on during the term. The numbers used in this assignment are to be a realistic estimate based on your research of similar projects. You should provide a written narrative, whether in the Notes section of PowerPoint, a Word document, or some other means, to explain and justify your numbers and analyses. As always, provide references for your sources. Use of a multimedia tool for example PowerPoint, Prezi, Storybird, etc. If you do not have access to a multimedia presentation application and you do not wish to use one of the free online tools, you can download Open Office at the URL below: https://www.openoffice.org/download/ Open Office is a free office productivity suite of products similar to Microsoft Office. Your presentation must contain the following elements: · Thorough discussion of financial concepts covered in this class · A capital budget · An operating budget for year one · A five year return on investment (ROI) · Capital structuring for the project · At least 15 slides · Slides must contain multimedia elements (graphics, animation, audio, etc.) · Last slide must be an APA formatted reference page with 5 or more scholarly references

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Hello Sport Financial Managers,

I've uploaded  two textbook chapters on capital budgeting  and an example of a  stadium budget from the Tampa Sports Authority . It will be quite easy to become intimidated once you start reading these chapters as you will likely encounter terms and concepts that you are not familiar with. Take heart! For your assignment, I'd like you to simply focus on the following:

· Initial capital investment (i.e., capital outlay or how much money is needed to construct the facility). Be sure to include the total cost of the facility including, building, equipment, and the cost of purchasing land (if the land is not public land). Use existing data from similar projects to make these estimations.

· Future cash flow projections (subtract ongoing facility expenses from ongoing facility revenues). You will need to make accurate projections by finding existing data on similar projects. You should explicitly answer the following questions, and any others that you can think of, that might impact the accuracy of your cash flow projections:

· How many seats will you facility hold? Is there spectator demand for a facility with that many seats in the proposed city? Here, you will should include a market analysis to determine spectator demand. In the case of this class, the market analysis would be determined by finding data on comparable facilities and the ticket demand for those facilities. You will also need to determine the demographics (e.g., population sizes) of your comparable markets and extrapolate those to your proposed market. For example, if you’re proposing a new facility in Des Moines, Iowa and you are using Los Angeles and the Lakers as a comparison, your conclusions will likely be inaccurate due to the population differences between the two cities.

· How important is ticket price to spectators? How would an increase in ticket price impact spectator demand?

· How will winning and losing affect spectator attendance?

· What additional cash flows can be expected from the facility (e.g., naming rights, multi-purpose usage, etc.)? Again, use data to support your conclusions.

· If luxury boxes are included, is there a demand from corporate clients for those seats? What is the price for those luxury boxes/seats? Again, use existing data to make your projections. Corporate demand is often determined by looking at existing Fortune 500 or large businesses in the region.

· How much will it cost to maintain and repair the facility after is constructed?

· Finally, you should provide the payback period (i.e., how long it will take to recoup the initial capital investment). Use the payback rule to see how long it will take to recoup the money after investing in constructing the facility.

· For example, assume I build a facility for $100 (in Year 0). I would find future cash flows by subtracting projected expenses related to the facility (e.g., maintenance, repairs, etc.) from projected revenues from the facility (e.g., ticket sales, naming rights, etc.) from the facility. Based on the data I found, I was able to project the following cash flows: $25 in Year 1, $35 in Year 2, $15 in Year 3, -$10 in Year 4, $30 in Year 5, and $30 in Year 6, it took between 5 and 6 years to recoup the initial $100 investment.

· I can then build a table (see below) to visualize all outlays and cash flows, and thus find the payback period:

·

Year	Cash Flow	Total Cash Flow
0	-$100	-$100
1	$25	-$75
2	$35	-$40
3	$15	-$25
4	-$10	-$35
5	$30	-$5
6	$30	$25

· I can use the following formula to find out exactly how long the payback period is: Payback = Numbers of Years Prior to Full Recovery + (Unrecovered cost at start of year/Cash flow during full recovery year).

So, in the example above the number of years prior to full recovery was 5 years because I didn’t fully recover the initial investment until Year 6. The unrecovered cost at the start of Year 6 was $5 (ignore the negative sign since it's actually $5 that hasn't been recovered, not -$5). The cash flow during the full recovery year (Year 6) was $30.

· Thus: 5 + (5/30) = 5.167. It would take 5.167 years to fully recover the initial $100 spent to construct the facility.