Ltc fin370 wk5 Copyright 2013 Edward F. T. Charfauros

Presentation by Celine Israel, Edward Charfauros and Tawnya Tanudra

Baderman’s Island Resort

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Agenda

• Introduction• Option Approach Strengths • Effects Of Globalization On Financial Decisions

Edward

Celine

Tawnya

• Option Approach Weaknesses• Option Approach Opportunities• Option Approach Threats

• Contributing Factors To Exchange Rate Risks• Mitigating Exchange Rate Risk• Conclusion

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• A modern complex luxurious resort • Best known for its customer adjustments meeting

every customer want through BIR’s amenities and facilities.

• Consists of a convention center, a pro shop, a spa, two gift shops, three world-class hotels, and four restaurants.

• Boardman Management Group manages the resort as each business entity is operating independently.

• Currently growing its recreational tourist centre • Prioritizing its business surrounding total quality

management (TQM) • Which implements BIR’s strategic objective. • Emphasizes continual empowerment for

improvement • Is seeking software development to upgrade BIR’s

word processing software by integrating Microsoft’s excel, outlook, power point, and word.

Introduction

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• Sells its shares publicly to attain funding

for its expansion projects.

• Considers acquiring the Atlantis Resort

because of its assets to increase growth

and market share.

• Considers merging as a last option by

acquiring the assets and absorbing the

liabilities of another hotel resort by

merging with Marriott International

Incorporated

• Seizing advantage of Marriot’s

recognition for market power

increase.

Merger

Initial Public Offering

(IPO)

Option Approach Strengths

Acquisition

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Option Approach Weaknesses

• Sustainability • Influencing viability• Structural changes• Capacity building of the organization or value

addition to the operations• Firm growth

• A bust in activity • Company activity may witness a bust in form

of profitability • Shareholding value to firm owners• Corporate strategies through mergers and

acquisitions

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Option Approach Opportunities• Acquisitions

• Restructures companies • Leads to massive external growth • Takeover of assets and liabilities

• Mergers• Combine operations to expand shareholder growth and profitability

• Operation expansion• Enhance continuation in firm operations

• Start green field projects

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Option Approach Threats

• Mergers• Expensive to start green field projects• Equally complex

• Acquisition• Poses a challenge to firm ownership • Equally complex

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• Able to globally trade freely to increase capital gains from countries worldwide.

• Technology upgrades continue organizational development.

• Becoming more profitable through trades of services at a profit while minimizing communication and transportation costs.

• These affects assist BIR’s financial decisions lowering concern and lessening globalization costs.

Effects Of Globalization On Financial Decisions

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• The risk that tomorrow’s exchange rate will differ from today’s rate

• Adverse affects on value of a company’s operations and investments

• Potential gain/loss in foreign markets if currency value rises/drops

• Impact on shareholders, customers, creditors

Contributing Factors To Exchange Rate Risks

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Mitigating Exchange Rate Risk

• Avoid Foreign Exchange exposure

• Forward Contracts

• Currency Swap

• Foreign Exchange Options Hedges

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Summary

• Recommendation: Merge

• Increase market power

• Better financial leverage to expand internationally

• Requires less risk than IPO and Acquisition

• Hedge foreign exchange rate risks and exposure to maintain and develop firm’s value

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Questions?