Strategic Corporate Finance /Case Study.

a block of residential flats hence the Chairman of the Board underscores the need to invest in the project to the tune of GBP 6 million in a 50 flat property. The price is considered attractive given the poor real-estate market conditions prevailing now as a result of global economic recession. This project will further the company’s strategy of steady growth by strengthening its portfolio.

Financially, the project provides a competitive return of 11.10% IRR and has a reasonable payback period of 5 years. The investment proposal also highlights synergies that can be derived from the existing sales infrastructure as well as the conservative revenue estimate with a possibility of long term asset appreciation.

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The Intercontinental Hotels Group is a London-based company specialising in hospitality industry. It runs its chain of ‘Intercontinental’ branded hotels in several cities in Europe and America. Though Intercontinental has properties comprising three broad categories, namely Luxury hotels, Business hotels and Leisure hotels, traditionally it has focused on business hotels, catering for traveling businessmen in the main commercial centres. The company reported earnings of GBP 34 million for the year 2008, with a net profit of GBP 3.20 million for the period. This was slightly better than the previous years’ figures of 30.5 million and 2.40 million respectively. We are considering an investment proposal which is in line with the company’s long term growth strategy.

A real estate company has promoted a block of 50 flats in East London. The building has 10 floors with 5 flats on each floor and about 95% of the project has been completed. The project is expected to be fully completed in about two months. Each flat is comprised of a two bedroom apartment fully furnished with kitchen, drawing room, furniture and other household appliances. The flats are located in a separate block with a reception area and well manicured lawns in front.

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