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Introduction

The primary focus of this presentation is on the creation and current status
of Walt Disney most important ventures that continues to give returns in
many different ways,

Overview
History, Mission & Vision
Strategy for Success & Risks Factors

Analysis
Cost of Capital
Capital Structure
Capital Budgeting

Building a New Building for $1 Million


Business Overview
The Walt Disney Company was founded by Walter Elias Disney
Hot Facts in 1923. The Walt Disney Co. is one of the best-known brands
Disney is 88 years in entertainment and retail with its headquarters currently
old
located in Burbank, CA. Disney has a number of well-
Disneyland
theme park is 60 differentiated products and studio entertainment such as
years old family films, theatrical divisions; parks & resorts, theme parks,
Disney has made cruise line. Disney products are toys, clothing, books, computer
458 films
including sequel! games and other merchandise.
They do theatre
productions such
as Pixar,
MISSION STATEMENT
Animation Studios "The mission of The Walt Disney Company is to be one of the
and Motion
Pictures. world's leading producers and providers of entertainment and
Disney has a cast
of 62.000
information. Using our portfolio of brands to differentiate our
content, services and consumer products, we seek to develop
the most creative, innovative and profitable entertainment
experiences and related products in the world."
Business Strategy
I do not like to repeat successes; I like to go on to other things.
Walt Disney

Past Strategies
Its Mission Statement and Vision Statement set the tone for much of the Disney success.
The expansion of innovative technology and a global market have affected the business strategies
A major strategy was to bring Disneys great storytelling to life with immersive experiences never
before imagined (Iger, 2012, p. 1).

Present Strategies
In 2012, CEO and President Robert Iger identified three particular strategies
Created high-quality content for families
Making that content more engaging and accessible through the innovative use of technology
Growing their brands and businesses in markets around the world

Future Strategies: Foreign Markets


Remain ready to adapt to the changing consumer wants
Adapt to meet growing consumer interests in foreign countries.
Using the strategy of Foreign Outsourcing to meet the companys growing demands and at the same
time, keep costs down.
Disney will continue is to build their strategies for reaching their global markets by following the
standards of those countries and paying the taxes of those countries (The Walt Disney Company,
2012).
Business Risk Factors
Changing Global Economic
Could affect the profits of some of the Disney businesses
Recent economic downturns, spending at the parks at
decreased, as well as decreased spending on advertising
Entertainment Tastes Subject to Change
Change suddenly and without warning, causing a change in
trends that could take the company by surprise.
Rapidly Changing Technology
The companys success is highly dependent upon technology,
which changes rapidly
Electronically Stored Data Protection
Data stored electronically is subject to invasion
Cost of Capital Analysis
According to YahooFinance!, the following data
from yahoo finance they reflect the financial
year ending September 2014.
Cost of debt (Kd) of Walt Disney will therefore
be computed as; Kd = interest (I) / value of
debenture (Berk & Demarzo, 2014, p. 413).

With the loan of $12,676,000 I will assume an


interest rate of 12%. Therefore the interest will be
$12,676,000 * 12% = 5,323,920
Kd = 5,323,920/$126,760,000
= 0.042 = 4.2%
Weighted Average Cost of Capital (WACC)

Berk & Demarzo (2014) defines, the WACC as the cost of all the sources of finance already
employed by the company. This is relevant than the individual cost of finance because the
company employs the entire capital as a whole and not the individual component of finance
(p. 489).
It is calculated by multiplying the cost of each component by the weight of the component on
the entire capital structure. WACC = KsWs + KdWd
=(0.042 * 34,301/46,977) +
(0.057 * 12,676/46,977)
=0.0307 + 0.015
= 0.0461 or 4.61%

It is assumed that these are the only two sources of finance in the
computation of the weights of the individual components of
finance.
Cost of Preferred Stock
Cost of preferred stock is the rate of return required by the holders of a
company's preferred stock.

Formula a simple straight preferred stock is:


Preferred Stock Value = Dividend
Discount Rate

To find present value of a preferred stock used the perpetuity formula:


Preferred Stock Value = Dividend
Price

Currently, Walt Disney does not have any


preferred stock. This therefore means that the
company raises its finances from the other
sources such as debt finance, retained earnings,
treasury stock and other liabilities.
Capital Structure Analysis
Capital Budgeting Analysis
New Building $1 Million
A project is accepted or declined by the management if it is evaluated using
either the NPV technique or any other project appraisal technique (Berk &
DeMarzo, 2014, 67).

In using the NPV method, a project is accepted if it has a positive net present
value (NPV) and rejected when it has a negative NPV.
NPV = sum of PV initial outlay
R = 4.5%
NPV = (70,000*17.064)- 1,000,000
= 194,480

The result yield a positive NPV therefore the project/investment


should be accepted.
In addition, this building will help in the generation of a
constant annuity cash flows for the next 6 years of $70,000.
this will result in to a positive NPV as computed above and
therefore the project/investment should be accepted.
Conclusion

The company does not have convertible and preference stock. Most of
the capital of the company is from retained earnings. This means that the
company minimizes on the cost associated with borrowing funds i.e.
floatation costs. This is because retained earnings do not attract
floatation costs.

This also means that the company does not pay dividends highly as its
retention ratio is higher as compared to its payout ration
Appendix

http://finance.yahoo.com/q/bs?s=DIS+Balance+Sheet&annual
Appendix
References
Berk, J., & DeMarzo, P. (2014). Corporate finance: The core (3rd ed.). Boston, MA: Pearson Education, Inc

Farfan, B. (2015). Company Mission Statements - Complete List of Worlds Largest Retail Missions. Retrieved
from, http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Walt-
Disney-Mission-Statement.htm
Iger, R. (2012). Annual Report and Shareholder Letter. Retrieved from http://cargocollective.com/HRHoward/Annual-
Report-The-Walt-Disney-Company
Investopedia.com. (2015). Retrieved from http://www.investopedia.com/walkthrough/corporate-finance/5/cost-
capital/cost-debt-preferred.aspx
Mycoted. (n.d.). Disney creativity strategy. Retrieved from http://www.mycoted.com/Disney_Creativity_Strategy
The Empire. (n.d.). 90 facts you didn't know about Disney: As Walt Disney studios marks its 90th birthday, we
celebrate with trivia! Retrieved on September 14, 2015, from http://www.empireonline.com/features/90-
disney-facts/
The Walt Disney Company. (2012). Retrieved from https://thewaltdisneycompany.com/investors/financial-
information
Yahoo finance. (2015) retrieved from http://finance.yahoo.com/q/bs?s=DIS+Balance+Sheet&annual
Questions
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