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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
