Hong Kong Disneyland
1. How would you value the Hong Kong Disneyland project from the perspective of Walt Disney?
The valuation of Hong Kong Disneyland from the perspective of Walt Disney is done by taking the following assumptions:
Cost of Capital = 9.52%
Cost of Government Debt = 8.19%
Cost of Commercial Bank Debt = 11.36%
Cost of Equity = 12.3% (10 year average)
Inflation = 7.31% (10 year average)
Gross margin = 37%
Operating Cost = 22%
Variable Management Fee = 5%
With the above assumptions the FCF of the project and the Royalties that Walt Disney would get were calculated by projecting the Cash Flows till 25 years.
The NPV of the project was found to be HKD1774million and the revenues to Walt Disney are HKD3834.51million.
2. How much does the attractiveness of the project vary according to different economic scenarios and financing arrangements?
Inflation Operating Costs 0.06 0.10 0.15 0.18 0.22
2.80 4261.05 2495.64 288.88 -1035.18 -2800.59
5.00 7269.95 5127.44 2449.30 842.41 -1300.10
7.31 11373.07 8716.44 5395.65 3403.18 746.55
10.00 17788.94 14328.58 10003.12 7407.85 3947.48
On performing the Scenario analysis by taking various Operating costs ranging from 6% (Oriental Land level) to 22% (Euro Disney level) and on Inflation from 2.8% (Minimum inflation in the past decade) and 10% (Highest inflation in the past decade was 9.6%) it was found that the FCF varies from 17.788billion to -2.8 billion.
Annual Attendees Operating Cost NPV (in Million HK$) 2.00% 0.10 3829.31
5.00% 0.10 7367.55
5.91% 0.10 8716.44
8.00% 0.10 12436.77
On doing a scenario analysis assuming different Annual attendees growth rate at 10% operating costs we find that the FCF varies from 3.829billion to 12.436billion.
Hongkong Government: Commercial banks Operating
Cost WACC NPV 0.8:0.2 10% 9.40% 11900.39
0.726:0.274 10% 9.05% 13095.64
0.9:0.1 10% 9.24% 12436.77
Doing a scenario analysis on the financing structure we find that the NPV of FCF
The valuation of Hong Kong Disneyland from the perspective of Walt Disney is done by taking the following assumptions:
Cost of Capital = 9.52%
Cost of Government Debt = 8.19%
Cost of Commercial Bank Debt = 11.36%
Cost of Equity = 12.3% (10 year average)
Inflation = 7.31% (10 year average)
Gross margin = 37%
Operating Cost = 22%
Variable Management Fee = 5%
With the above assumptions the FCF of the project and the Royalties that Walt Disney would get were calculated by projecting the Cash Flows till 25 years.
The NPV of the project was found to be HKD1774million and the revenues to Walt Disney are HKD3834.51million.
2. How much does the attractiveness of the project vary according to different economic scenarios and financing arrangements?
Inflation Operating Costs 0.06 0.10 0.15 0.18 0.22
2.80 4261.05 2495.64 288.88 -1035.18 -2800.59
5.00 7269.95 5127.44 2449.30 842.41 -1300.10
7.31 11373.07 8716.44 5395.65 3403.18 746.55
10.00 17788.94 14328.58 10003.12 7407.85 3947.48
On performing the Scenario analysis by taking various Operating costs ranging from 6% (Oriental Land level) to 22% (Euro Disney level) and on Inflation from 2.8% (Minimum inflation in the past decade) and 10% (Highest inflation in the past decade was 9.6%) it was found that the FCF varies from 17.788billion to -2.8 billion.
Annual Attendees Operating Cost NPV (in Million HK$) 2.00% 0.10 3829.31
5.00% 0.10 7367.55
5.91% 0.10 8716.44
8.00% 0.10 12436.77
On doing a scenario analysis assuming different Annual attendees growth rate at 10% operating costs we find that the FCF varies from 3.829billion to 12.436billion.
Hongkong Government: Commercial banks Operating
Cost WACC NPV 0.8:0.2 10% 9.40% 11900.39
0.726:0.274 10% 9.05% 13095.64
0.9:0.1 10% 9.24% 12436.77
Doing a scenario analysis on the financing structure we find that the NPV of FCF