Coast4Life

 Coast4Life Article

By: Pat Brown, CMA

To: Board of Directors

Subject matter: Analysis of alternative strategies to preserve profitability during industry recession

Since starting operations in 2002, the company has enjoyed immense revenue growth along with healthy fluidity and insurance (see EX-5). However , due to the recent strike, we are anticipating a substantial drop in earnings for the upcoming season. As per my own analysis in EX-2, I have determined that if we expect bookings to decline by simply 30% -assuming that we can easily rent a single boat each year during the off-season at the same hire we received in 2012-, the company will have a net loss of $515, 800. To be able to ensure that the business earns money despite the expected downturn, I've analysed the four alternatives suggested by Board to keep profitability throughout this anticipated downturn.

1)Divesture of Fraser Dry Ipod dock

Under this kind of alternative, the Dry Pier will be purcahased by an interest get together for a $1. 7M will be booked. In EX-1 I've calculated NPV of the offering the dry dock. While selling the dry dock will enhance income inside the following year, it is crystal clear from my personal analysis that over the long-term, the impact about profitability is more ambiguous. The complete NPV of executing this alternative in accordance to my own analysis is $595, 467. 75. Considering that the overall net profit recently was $8, 455, 000, the long term impact of this alternative is rather little. While it is apparent that the just reason the Dry Pier division is profitable simply due to the intercompany revenues (i. e. repair of the two ships), closing down this section has a number of downsides. Firstly, we will be completely cutting off a revenue stream that could be used to mitigate against declining income in other divisions. Also, lounging off the entire staff could possibly be detrimental to the relationship the company offers with the neighborhood as well as harm the popularity for security that Coast 4 Your life currently features.

2)Targeting a More Successful Segment...


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