Complete Case details are given below :
Case Name : Super 8 Motel- Guelph
Authors : Karim Ismail, Fred Pries
Source : North American Case Research Association (NACRA)
Case ID : NA0160
Discipline : Finance
Case Length : 13 pages
Solution sample availability : YES
Plagiarism : NO (100% Original work)
Description for case is given below :
Dean Ismail, owner and general manager of the thirty-six-room Super 8 Motel located in Guelph, Ontario, was offered $2.9 million for the motel. After managing the motel for nearly twenty years, Dean and his family were faced with the decision to either sell or keep the motel. If they were to sell the motel, Dean would need to determine if the offer of $2.9 million was actually a fair selling price for the property. The decision needs to be made in the face of significant uncertainty in the local market. New hotels planned for the local area will increase the supply of available rooms by more than 80 percent in the next two years. This significant increase in the supply of available rooms could have a significant impact on occupancy rates and room rates and, consequently, on the revenues and cash flows of the Super 8 Motel. Like many owner-managed businesses, the financial statements of the motel reflect personal and corporate planning issues (e.g., salaries that are above market rates, bonuses, and management fees) making it difficult to identify the income and cash flows that are directly related to the motel operations. In addition, sale of this property could affect the value of an adjacent property owned by Dean. Dean has fourteen days to decide whether to accept the offer of $2.9 million for the motel or reject it, retaining the motel and the future cash flows that the motel generates.
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