Financial Decision Making For Creative Projects and Events

Question: Discuss about theFinancial Decision Making For Creative Projects and Events. Answer: SWOT Analysis of WDP The major strength area of the company included that it dealt with creativity, flexibility and provided the tailored solutions to the clients as and when they needed. They make economical use of the discarded and existing buildings to provide logistic solutions to the clients. Thus they make good use of the available resources and are often known as the warehouses with brains. It puts its focus on sustainable development and economical use. It makes sure that it is investing in highly economical sites depending on the demand of the client and has built its own data store[1]. It provides end to end services to the clients that focus on fast delivery, end to end customer support, giving feedbacks as and when required, tailoring the resources to suit the demand of the client and all of these must be backed by fair amount of research and evaluation. The major weakness of the company includes that there was a lack of a strong financial base for the company and that affected it growth prospects and also affected the overall rate of investments that the company received from proficient investors and clients. To solve the same the company was looking towards launching the SEO prospects that will help them in solving the issues in their financial prospects and help them attract better finances that will support their overall growth and development[2]. The new SEO prospects that the company was considering will bring a change in the present financial system of the company and will also help in improving the stand of the investors of the company. Thus this will improve the position of the company and open new avenues for the company. The company also has other opportunities like improvement in the customer standing, better services to be provided. Changes in the government policies and trade practices will open new avenues for the company. The few threat elements that the company is facing are competition from the other real estate companies that are also operating in the same line of business. The company will also face issue if there are changes in the overall trade practices[3]. Also the present uncertainties in the financial markets and the presence of the Brexit may add up to the tension and effect the overall position of the company. Given the present financial structure of the company, if the SEO prospects work accordingly, then issuing the new shares will be beneficial for the company, but the company needs to keep in mind that the existing shareholders of the company exercise their priority rights accordingly and that will then make the price of the new shares equivalent to the existing prices and that will attract new investors. The company must also keep in mind that it is earning effective amount of revenue so that new investors can be paid decent amount of dividend. The trade policies and the government regulations and the state of the financial structure must be considered before issuing new shares[4]. If all the factors are favorable then that will help the company in improving their capital base if new shares are issued accordingly. The company management came up with an unique idea for solving its present deficiency in the financial structure, the SEO proposal was a unique solution in which the company was offering 2369560 shares, as per which they were creating one extra share for every eight share that was outstanding on part of the company. On the SEO offer price that will be determined only institutional investors will be allowed to participate and that will be known as accelerated book building. But the final allocation of these shares will be subject to the priority allocation that will be done to the existing shareholders. The main advantage of these proposals for the company will be that there is a very fast execution and that is better than the traditional right issue of shares. It will help to restrict the exposure of the firm to fluctuating market conditions, and is also cheap in respect of the cost incurred and the total time required for the process is also very less. There is no need to engage in hard assignments and that will help the company in saving the overall cost and also reduce the risk elements[5]. These are the advantageous of the proposed strategy of the company. The cons that are attached with the new proposal is that it is restricted to the rights exercised by the existing shareholders and there were many issues in finalizing the proposed system for the company. The overall financials of the company were at stake and the company needed to look for the present market conditions in order to make the issue of the new shares public[6]. The main disadvantage in relation to the traditional system is that the risk element is very high for the company and if unsuccessful it might affect the overall position of the existing shareholders of the company. The main reasons for this proposal were that the company wanted a change in its existing policy of dividend distribution and also wanted to improve its stand in respect of the same. The CEO must recommend the new strategy to the board because the pros outweigh the cons and if the proposal is successful it will be beneficial for the company in many ways and thus taking such small amount of risk at some place will not hamper the company much[7]. And also it can be seen that there is a stagnancy in the present position of the company and it is important that changes must be there to make sure that the company is growing in the times to come. Valution of the share price of the company using the multiple valuation model. The basic formula that can be applied in the use of various multiples like p.e ratio, book value ratio. Because of lack of information all ratios cannot be used. The only formula that can be applied is Book value per share 41.94 Earning per share is 7.85 Total EBDITA is 119,531,000 Therefore total number of shares- 119531000/41.94 = 2850048 Total value will be 2850048*7.85 = 2237284 The valuation of the shares using the dividend discount model Profit for this year = 2016 = 71384*4/3 = 95178.67 Dividend to be paid = 95178.67*0.80 = 76142.93 Earning left = 95178.67-76142.93 = 19035.73 Growth rate is 25 percent = 19035.73*1.25 = 23794.67 Discounting rate is 10 percent, therefore value of the shares will be 23794.67/0.10 = 237946.7 Note : All the above figures that have been calculated as per the models are in thousand euro multiples. The value of the shares at the time of SEO was 1.62 billion euros, which is less then the value that is calculated as per the above valuation models. Thus the stock is undervalued. References Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-431. 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