Case Marriot and Flinder Valves Essay

1. Why is Marriotts CFO proposing the Project Chariot?To imbibe better the financial performance of the household, by re-structuring the confederation in two separating activities to distinguish those that look at a large fixed assets (Real estates ownership) and those with congener low amount of assets (Management run and others).By dividing in this way, the large amount of debt volition go with the real estates ownership called soldiers Marriott Corp. (HMC), whereas the rest of activities go out go to Marriott internationalistic (MII). Doing so, the value of the 2 firms combined leave behind exceed this years contain value, according to expectations (see appendix 1).2. Is the proposed restructuring consistent with directions responsibilities?It is, as it clearly secern the activities and center on management services rather than owning the hotels. Furthermore, it improves the bills flows from the existing social organisation (see appendix 1), this betterment beq ueath concede HMC to meet its debt responsibilities ( a total coin flow projected of $771 million in 1992 versus $478 million in 1991.The DCF in HMC assume a worst slick scenario volition exceed current value of the firms assets $5,218 million versus $4,600 million, which indicates that the firm go away improve as its assets will appreciate.3. The character reference describes two conceptions of managers fiduciary duty (page 9). Which do you favor the shareholder 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 power is met, other financial gaps can be covered, plus it revalues the total firm base upon the expected cash flows.In this grumpy case, by having this improvement on cash flow, debt responsibilities can be covered inside(a) HMC or by using the business concern of credit guaranteed by MII.On regards of the bondholders, t he election is to increase the consecrate as bonds will reduce the grade to junk bonds, for the advisement on DCF we assume a return of 10.81 assuming the highest risk for bonds. This action will compensate 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.