CITIC TOWER II: THE REAL OPTION Suffolk University – FIN- 881 Fall 2014 Name: Abdelrhman El Refaiy Larry Young the Chairman of Citic Pacific Limited has to make a decision to develop a new project under the name Citic Tower II. The development project that will take place in Hong Kong is expected to leave the company with $60 MM in losses as per NPV analysis. Citic’s property development team has set rigid assumptions to build their NPV model that estimated net positive cash inflows at $1.54 billion
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CITIC TOWER II: THE REAL OPTION CASE STUDY SUMMARY Scenario * Undeveloped prime waterfront property on Victoria Harbor was bought 6 months ago at public auction * Owner now wants to sell the land and is available to Citic Pacific Limited on a first-choice basis through an intermediary * Larry Yung (Chairman) thought they could acquire the site and turn it into another Grade-A office building “Citic Tower II” * Asking price of the land was $1 billion * Net present value of property
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Larry Yung‚ Chairman of Citic Pacific Limited‚ has a decision to make. He must decide if he should invest in property and build the “Citic Tower II”. Under the current conditions‚ the current net present value is negative‚ which is one of the factors that Larry is using to decide. Another concern is that the commercial real estate market is very cyclical in the area. Also‚ with the current economic conditions‚ there is not really a guarantee that the “Citic Tower II” will survive in the area‚ which
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It was three o’ clock on a hot afternoon in Hong Kong in mid-2000. Larry Yung‚ Chairman of Citic Pacific Limited (“CPL”)‚ was having a board meeting with his property development team. From his window on the 33rd floor of Citic Tower‚ he could see the impressive Victoria Harbour and an undeveloped prime waterfront site. This piece of reclaimed land had been purchased by a company six months earlier at a public auction. Now‚ the owner wanted to dispose of it‚ and hence it was made available to CPL
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EXECUTIVE SUMMARY: The company should decide whether to go ahead with the Citic Tower II project or not. The following alternatives can be used to address the problem: NPV: Net present value (NPV) is defined as the total present value (PV) of a time series of cash flows. It is a standard method for using the time value of money to appraise long-term projects. The method is used for capital budgeting‚ and widely throughout economics‚ it measures the excess or shortfall of cash flows‚ in present
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2008‚ CITIC Group injected assets into CITIC Pacific through issuance of convertible bond and increased its equity interest in CITIC Pacific to approximately 57.56%. Rong Zhijian‚ former Chairman of the board of CITIC Pacific‚ resigned in April 2009. The 2008 foreign exchange losses controversy terminated the history of CITIC Pacific as an SOE operated by Rong’s family as individuals. During the past twenty years‚ Rong has operated CITIC Pacific to be an independent kingdom. However‚ for CITIC Group
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Case Synopsis A. The chairman of Citic Pacific‚ Larry Yung Chi-kin’s father Yiren Rong started the company in 1978. • Citic was started “to pioneer reform in the financial sector‚ lure foreign investment and technology to China and develop international business.” (Ko‚ 2009) • When Yung became involved with the company he began to acquire more companies. o Eventually had Citic Pacific listed as a red-chip company in the Hong Kong
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3.1 Motivation of Using Virtual Environment In this study we aim to develop a simulation-based virtual environment that involves the tower crane operations. In the very first step‚ the tool simulates an example of crane lifting operation in a three-dimensional (3D) virtual environment. The environment involves the main features of the simulation such as collision detection technology‚ reality integration and crane operation functions. The main reasons of using these features are to provide a realistic
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The servicescape plays a major role in the Clock Gate Tower in Youghal. As the service that is being offered here is intangible‚ the physical environment is used to create a sense of tangibility within the service in order for customers to gain a better experience (Vliet‚ 2013). It provides the visitors with a greater understanding of what the firm is offering and what the tour involves as it creates an image that brings the tour to life. The building itself immediately creates an image of what
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Tower crane manufacturer Wolffkran has acquired UK rental company and Wolffkran distributor HTC Plant from owner PC Harrington. The deal‚ for an undisclosed sum‚ was signed on 14 May and includes the fleet of more than 200 Wolff tower cranes‚ mostly luffers‚ and the 370-strong workforce will be retained‚ Peter Schiefer‚ Wolffkran owner told. The acquisition coincides with HTC’s 40th Anniversary as Wolffkran dealer for the UK. HTC Plant has a turnover of more than £40 million (US$ 60 million) and
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