Thursday, January 17, 2019
Case Marriot and Flinder Valves Essay
1. Why is Marriotts CFO proposing the Project transport?To improve the financial performance of the satisfying, by re-structuring the company in twain separating activities to distinguish those that require a large fixed assets (Real estates ownership) and those with relative commencement amount of assets (Management work and others).By dividing in this way, the large amount of debt volition go with the real estates ownership called Host Marriott Corp. (HMC), whereas the rest of activities entrusting go to Marriott International (MII). Doing so, the value of the 2 firms combined will exceed this divisions book value, according to expectations (see appendix 1).2. Is the proposed restructuring consistent with managements responsibilities?It is, as it clearly separate the activities and focalization on management services rather than owning the hotels. Furthermore, it improves the bills flows from the existing structure (see appendix 1), this receipts will allow HMC to meet its debt responsibilities ( a total cash flow communicate of $771 million in 1992 versus $478 million in 1991.The DCF in HMC assuming a worst case scenario will exceed current value of the firms assets $5,218 million versus $4,600 million, which indicates that the firm will improve as its assets will appreciate.3. The case describes two conceptions of managers fiduciary duty (page 9). Which do you favor the stockholder conception or the corporate conception? Does your stance make a difference in this case?We agree upon favoring the shareholder conception, as this provides an improvement on cash flows, as this condition is met, other financial gaps fanny be covered, plus it revalues the total firm based upon the expected cash flows.In this particular case, by having this improvement on cash flow, debt responsibilities squirt be covered inside HMC or by using the parameter of credit guaranteed by MII.On regards of the bondholders, the option is to increase the return as bonds will reduce the grade to junk bonds, for the calculation on DCF we convey a return of 10.81 assuming the highest risk for bonds. This action will jog bondholders for the action.4. Should Mr. Marriott recommend the proposed restructuring to the board?Yes, as it increase the value of the combined firms, focus activities per company and provides better cash flows.