A Sample Case Study of Math for a Casino Business Proposal


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Build Spreadsheet Models to Check the Math

OLG Hosting Formula Proposed for Toronto: image by Mike DeHaan

OLG Hosting Formula Proposed for Toronto (Click for larger image): Image by Mike DeHaan

One might trust that Ernst & Young, with its background in audit and accounting services, to calculate math accurately.

However, a business case study example should check the figures. Readers are encouraged to build a spreadsheet, whether using Microsoft Excel (MS Office) or Apache OpenOffice, or any preferred calculation software.

This first spreadsheet tab is based on the new OLG Hosting Fee structure. All cells with a white background are direct entries; blue backgrounds are calculated. We calculate the “partial revenue” because of the way the formula works; then simply multiply that dollar figure by the rate to calculate the “partial hosting fee”.

Note that the “old rate” is a constant 4%. A business presentation should just show the rate once; but this approach works too. Then the “Total Fee” column simply tallies up the partial fees.

The $50 (million) hosting fee is highlighted on both “new” and “old”. The “total revenues” of $1,250 versus $7,507 are chosen to allow the formulae to reach the target hosting fee.

The next exercise for the reader is to add two rows to your table, to show the total revenue required to generate a hosting fee of $100 million.

Keen readers may add a section to generate the “50/50” result of $168 million.

Individual Slot Machine Revenue Projections for the Proposed Toronto Casino

Projected Revenue per Slot Machine in Toronto (Click for larger image): Image by Mike DeHaan

The second spreadsheet tab calculates the projected revenue for each slot machine in Toronto.

Note that “hours/day” is a parameter. The casino business proposal discusses whether the facility should be open “24/7”, or close for a few hours nightly. A complete business study would show each possibility.

The casino’s manager of slot machines would put the machines out of service for maintenance from time to time, for cleaning, maintenance and raking out the accumulated coins. That makes “revenue per minute” a more difficult target to achieve.

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