Welcome Jim Hunt, Executive Vice President and CFO, Walt

WelcomeWelcomeJim HuntJim Hunt, , Executive Vice President Executive Vice President

and CFO, Walt Disney Parks and and CFO, Walt Disney Parks and ResortsResorts

Andy WuAndy Wu, , VP of Finance and VP of Finance and Business PlanningBusiness Planning

Spain or France

Analyzing the Facts

Key AssumptionsKey Assumptions

Hotel occupancy rate: 100%Hotel occupancy rate: 100%

Average IncomeAverage Income

Capital BudgetingCapital Budgeting

WACC = 9%WACC = 9%

•Cost of debt = 10%Cost of debt = 10%

•Cost of equity = 16.5%Cost of equity = 16.5%

Capital BudgetingCapital Budgeting

NPVNPV

Initial Investment = $470 Initial Investment = $470 millionmillion

IRR = 48%IRR = 48%

Beta = 1.5Beta = 1.5

Business RiskBusiness Risk

NOPATNOPAT

ROICROIC

Standard DeviationStandard Deviation

Business RiskBusiness Risk

Demand VariabilityDemand Variability

Business RiskBusiness Risk

Sales Price VariabilitySales Price Variability

Input Cost VariabilityInput Cost Variability•Spanish GovernmentSpanish Government

Ability to adjust output in Ability to adjust output in response to inputresponse to input

New ProductsNew Products•Cultural DifferencesCultural Differences

Foreign Risk ExposureForeign Risk Exposure

SWOT AnalysisSWOT Analysis

StrengthsStrengths

•WeatherWeather

•Government AidGovernment Aid

•Price of LandPrice of Land

SWOT AnalysisSWOT Analysis

WeaknessesWeaknesses

•RevenuesRevenues

•CurrencyCurrency

SWOT AnalysisSWOT Analysis ThreatsThreats

•TerrorismTerrorism

OpportunitiesOpportunities•Government Government StabilityStability

•EconomyEconomy•OlympicsOlympics

SupportSupport•GovernmentGovernment•CommunityCommunity

Competing AttractionsCompeting Attractions Higher ROICHigher ROIC

RecommendationsRecommendations

QuestionsQuestions

and/or and/or

CommentsComments

FranceFrance

Key FactorsKey Factors

Initial InvestmentInitial Investment

Magic Kingdom vs. MGMMagic Kingdom vs. MGM

Number Of VisitorsNumber Of Visitors

Number of VisitorsNumber of Visitors

What If:What If:

•100%100%• 75%75%• 50%50%

Ticket SalesTicket Sales

In Park SalesIn Park Sales

Hotel OperationsHotel Operations

Number of VisitorsNumber of Visitors

Capital Budgeting Capital Budgeting WACC: 7.75%WACC: 7.75%

•Cost of Debt: 9%Cost of Debt: 9%•Cost of Equity: 14.8%Cost of Equity: 14.8%

Beta Risk: 1.7Beta Risk: 1.7

Capital BudgetingCapital Budgeting

NPVNPV•Walt DisneyWalt Disney

France: $2.2 billionFrance: $2.2 billionSpain: $1.4 billionSpain: $1.4 billion

•Euro DisneyEuro Disney

IRR – Walt DisneyIRR – Walt Disney

•France 51%France 51%•Spain 48%Spain 48%

Capital BudgetingCapital Budgeting

Business RiskBusiness Risk

NOPATNOPAT

ROICROIC

Standard DeviationStandard Deviation

Business RiskBusiness Risk Foreign Risk ExposureForeign Risk Exposure

Demand VariabilityDemand Variability

Develop New ProductsDevelop New Products

StrengthsStrengths

•Tourist attractionTourist attraction

•Name RecognitionName Recognition

•FamiliarityFamiliarity

France AnalysisFrance Analysis

WeaknessesWeaknesses

•Different cultureDifferent culture

•Design duplicationDesign duplication

France AnalysisFrance Analysis

France AnalysisFrance Analysis ThreatsThreats

•UncertaintyUncertainty

•OppositionOpposition

France AnalysisFrance Analysis

OpportunitiesOpportunities

•New marketNew market

•DiversityDiversity

RecommendationsRecommendations

QuantitativeQuantitative•NPVNPV•IRRIRR

QualitativeQualitative•SWOT AnalysisSWOT Analysis

QuestionsQuestions

and/or and/or

CommentsComments

Conclusion Conclusion

What’s more important?What’s more important?

•NPV and IRRNPV and IRR•NOPAT and ROICNOPAT and ROIC

Further considerationFurther consideration