BIZ201 Accounting for Decision Making Assessment 4

TASK 1

As part of the refurbishment project, the Crystal Hotel would like to introduce fresh plants into the lobby area, function and conference rooms. The management has however, dilemma on whether to hire a professional company that will deliver the plants and maintain them or whether to purchase the plants themselves and hire a gardener for the maintenance of the plants. It is estimated that the plants would need to be replaced every three years. From experience, contracting a gardener to take care of the plants would cost the hotel $230 per week. For simplification, purposes assume the gardener’s invoice is paid at the end of each year. The list of the required plants together with costing is included in the Appendix 2 of this document. The hiring contract requires payment at the beginning of the year for the full year.

REQUIRED:
Compare the two options and make recommendation to the Hotel on whether to hire or purchase the plants. Take into account the time value of money at the discount rate of 8%. Include advantages and disadvantages of each option and justify your choice.