Course: X130A – Basic Managerial Finance
Quarter: Spring 2016
Instructor: Trevor Smith
Office Hours: By Appointment Only
You will select a public company and identify two major new products or services the company plans to manufacture or offer. You will create a 5-7 page memo recommending one of the two projects to the company’s senior executives and board of directors. The memo will include:
• A brief description of each product or service being considered;
• Major assumptions (projected future cash flows, discount rate, etc.) used to create the data used in your evaluation;
• A final recommendation including the investment criteria(s) used to make the recommendation.
New Product/Service Example
Disney is in the process of simultaneously pursuing two projects expected to cost over $1 billion. The first project is MyMagic+, a technology project at Walt Disney World. MyMagic+’s key element is a rubber bracelet called a MagicBand whose functionality includes a reservation system for theme park rides, theme park tickets, hotel room key, and a credit card. Disney expects the MyMagic+ product to increase in park sales by: encouraging visitors to spend more vacation time at Disney World instead of visiting off-property attractions; make food and souvenir purchases easier to complete and process; and collecting more personal data about visitors facilitating customized sales efforts.
The cost of the MyMagic+ product is estimated in the $1.1-$1.5 billion range.
In addition to the MyMagic+ product Disney is also developing a new theme park in Shanghai. This new resort will include: Shanghai Disneyland, two Disney-themed hotels, and a large retail, dining, and entertainment venue.
The cost of the Disney’s Shanghai Resort is estimated in the $3.7-$4.4 billion range.
Your memo would recommend one of these two projects to Disney’s senior executives and board of directors using the investment decision making tools and methodologies we’ll cover during this course.