OPERATIONS

MANAGEMENT

Presented By:
Group 2
Bharat Maniam 11C
Chayanika Das 12C
Kritika Bhatnagar 21C
Saumya Chaturvedi 39C
Vaibhav Mehta 49C
 Case Summary Solution Summary

Grandeur Chicken Restaurant

Base Scenario NPV: $ 6,96,842
• Expected Sale in Current Year: 80,000 meals. Scenario 1 NPV: $ 7,08,707
• Operating at: 100% capacity Scenario 2 NPV: $ 7,39,580
• Dining room capacity: 1,05,000 dinners per year
• Forecasted demand : additional 10,000 meals in each succeeding year Better Option: Scenario 2

Alternative 1
• Expansion of both kitchen and dining room
to combined capacity : 1,30,000 meals per
year
• Initial Investment : $ 200,000 (made at the
end of year 0)
• Average meal price: $10 ($8 variable cost,
$2 Pretax profit)
• Before Tax profit margin: 20%
• Discount rate: 10%
Alternative 2
• Two Stage expansion
• Kitchen expansion from 80,000 meals per
year to 1,05,000 per year
• If sales in year 1 and 2 are met, capacities
of both kitchen and dining combined to be
expanded at the end of year 3 to 1,30,000
per year
• Initial investment: $80,000 at the end of
year 0
• Additional investment: $1,70,000 at the
end of year 3
• Pretax Profit: $2 per meal
• Discount Rate: 10%
 Graphical Representation

Scenario 1 Scenario 2
140,000 140,000

120,000 120,000

100,000 100,000

80,000 80,000

60,000 60,000

40,000 40,000

20,000 20,000

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1 2 3 4 5 6 1 2 3 4 5 6
Capacity Demand Capacity Demand