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Tokyo Disneyland And The DisneySea Park Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 1607 | 361 Words (3 Pages) | Mitsuru Misawa | University of Hong Kong : HKU568 |
A Word File
The foremost reason as to why OL undertook the project roots from the fact that the target company was well established, and its performance was brilliant. This cause was sufficient enough for OL to set aside the results of their capital budgeting technique. The future prospects of WD forced OL to commence the project.
Following questions are answered in this case study solution
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Do capital budgeting analysis based on AAR method, NPV, IRR, ACFR, and payback.
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What decision would you make based on your analysis?
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Why do you think OL undertook the project, even though, their decision was not supported by their own method?
Case Analysis for Tokyo Disneyland And The DisneySea Park
1. Do capital budgeting analysis based on AAR method, NPV, IRR, ACFR, and payback.
AAR : The following formula is used for the computation of AAR.
AAR = (Average Net Income) / (Average Investment)
The initial investment for Tokyo Disneyland is ¥400 billion. On the other hand, the average net income for a period of 20 years is ¥142.07 billion. By applying the formula, the AAR comes out to be 71.54%.
NPV : NPV can be calculated by subtracting the initial investment from the sum of the discounted future cash flows. Mathematically,
NPV = -Initial Investment + ∑_(i=1)^20▒(Cash Flow at n) / (1+r)^n
The following table depicts the detailed calculations for NPV.
IRR : IRR is that rate at which the NPV of the project is zero. Using hit and trial method, the IRR is calculated to be 18.82%.
Payback Period : Payback period represent the time taken by the project to recover its initial investment. For the current project, the simple payback period stands at 2.46 years.
ACFR : The ACFR is calculated by using the following formula.
ACFR = (Average Cash Flow + Ending Book Value of Assets) / (Initial Cash Outlay)
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