Walt Disney Company Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Walt Disney Company Case Study Solution

Introduction

Walt Disney is a diversified international company situated in California. The company was incorporated in 1938. The company is successor to animated motion picture business started by two brothers Walt and Roy Disney in 1923. The early business exalt cartoon characters films like Mickey Mouse and Donald Duck. While after converting into company from business they starts to provide entertainment, motion pictures, television pictures and some other products.

In addition to this company also receives royalties in Yen from Tokyo Disneyland over its certain revenues. The other revenue generating resources of Disney are production of motion pictures theatrical, television and home video markets for audiences around the world.

The financial performance of the company and its subsidiaries improves in the current year. Revenue is increased by approximately 27% to $1.7billion and royalties from Tokyo Disneyland is increased by approximately 6% to $1.1billion. Furthermore, the total assets are also increased by approximately 15% to $2.7billion.

Problem Statement

The finance director of the company Rolf Anderson has concerned about the foreign exchange exposure in yen royalty receives from Tokyo Disneyland. These royalties had significantly increasedin last year and Anderson anticipated further growth in it. Anderson concerned increase due to recent depreciation of yen against dollar.

Rolf Anderson is considering hedging techniques to reduce this exposure. He mainly consider foreign exchange options, futures and forwards. Along with these techniques he is also considering to swap existing dollar debt into yen liability. He is considering to swap 10billion yen liability matures in 10 years and having annual interest of 7.5%.

Analysis

Swap

It is a derivative contract in which two parties exchange financial instruments. Anything can be consider as financial instruments but most of the times cash flows based on national principle amounts are taken as swaps.

In swaps usually principle does not change however two parties exchange interest rate they swap fixed interest rate with floating one and vice versa. There are two main types of swap interest rate swap and currency swap.

Futures

It is also a derivative contract. In this contract parties are legally bind to buy or sell something on agreed price and on predefined date. The price at which assets are buy and sell is also known as forward price. Therefore, sometimes it is also called forward contract.

Walt Disney Company Harvard Case Solution & Analysis

Recommendation

If we analyze the results of three swaps then we can conclude that the IRR of ten year Euro bond (Sinking fund) is higher than remaining two swaps. Furthermore, the net liability will also be approximately ECU200000 lower than ten-year yen bullet loan.................

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