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Finance problem Walt Disney case study

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CopyrightWalt Disney Company's Slepping Beauty Bonds-Duration Analysis-coursewareHarvard Business School Case 294-038Courseware 9-208-725This courseware was prepared by Professor Carliss Y. Baldwin solely for students as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright 2008 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording or otherwisewithout the permission of Harvard Business School.

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Basic SpreadsheetSleeping Beauty Basic SpreadsheetCalendarRelativeCash FlowPresentPresent ValuePrice of Bond @7.55%Price of Bond @8.55%Price of Bond @6.55%YearYearper $100ValueEach Cash Flow1993075.5075.50100.0088.31115.24199417.556.867.026.967.09199527.556.246.536.416.65199637.555.676.075.906.24199747.555.165.645.445.86199857.554.695.255.015.50199967.554.264.884.615.16200077.553.874.544.254.84200187.553.524.223.924.54200297.553.203.923.614.272003107.552.913.653.324.002004117.552.653.393.063.762005127.552.413.152.823.532006137.552.192.932.603.312007147.551.992.732.393.112008157.551.812.532.212.922009167.551.642.362.032.742010177.551.492.191.872.572011187.551.362.041.722.412012197.551.231.891.592.262013207.551.121.761.462.122014217.551.021.641.351.992015227.550.931.521.241.872016237.550.841.421.141.752017247.550.771.321.051.652018257.550.701.220.971.552019267.550.631.140.891.452020277.550.581.060.821.362021287.550.520.980.761.282022297.550.480.910.701.202023307.550.430.850.641.132024317.550.390.790.591.062025327.550.360.740.550.992026337.550.330.680.500.932027347.550.300.640.460.872028357.550.270.590.430.822029367.550.240.550.390.772030377.550.220.510.360.722031387.550.200.480.330.682032397.550.180.440.310.642033407.550.170.410.280.602034417.550.150.380.260.562035427.550.140.360.240.532036437.550.130.330.220.492037447.550.110.310.200.462038457.550.100.290.190.432039467.550.090.270.170.412040477.550.090.250.160.382041487.550.080.230.150.362042497.550.070.210.140.342043507.550.060.200.120.322044517.550.060.180.120.302045527.550.050.170.110.282046537.550.050.160.100.262047547.550.040.150.090.252048557.550.040.140.080.232049567.550.040.130.080.222050577.550.030.120.070.202051587.550.030.110.060.192052597.550.030.100.060.182053607.550.020.100.050.172054617.550.020.090.050.162055627.550.020.080.050.152056637.550.020.080.040.142057647.550.020.070.040.132058657.550.020.070.040.122059667.550.010.060.030.112060677.550.010.060.030.112061687.550.010.050.030.102062697.550.010.050.030.092063707.550.010.050.020.092064717.550.010.040.020.082065727.550.010.040.020.082066737.550.010.040.020.072067747.550.010.030.020.072068757.550.010.030.020.062069767.550.010.030.010.062070777.550.000.030.010.062071787.550.000.030.010.052072797.550.000.020.010.052073807.550.000.020.010.052074817.550.000.020.010.042075827.550.000.020.010.042076837.550.000.020.010.042077847.550.000.020.010.042078857.550.000.020.010.032079867.550.000.010.010.032080877.550.000.010.010.032081887.550.000.010.010.032082897.550.000.010.010.032083907.550.000.010.000.032084917.550.000.010.000.022085927.550.000.010.000.022086937.550.000.010.000.022087947.550.000.010.000.022088957.550.000.010.000.022089967.550.000.010.000.022090977.550.000.010.000.022091987.550.000.010.000.022092997.550.000.010.000.012093100107.550.010.070.030.19

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Interest Rates Ques 6Sleeping Beauty Present Value as a Function of the Interest RateCalendarRelativeCash FlowInterestPresentYearYearper $100RatesValues199302%$339.20199417.553%$243.78199527.554%$186.99199637.555%$150.61199747.556%$125.76199857.557%$107.85199967.558%$94.38200077.559%$83.89200187.5510%$75.50200297.5511%$68.642003107.5512%$62.922004117.5513%$58.082005127.5514%$53.932006137.5515%$50.332007147.5516%$47.192008157.5517%$44.412009167.5518%$41.942010177.5519%$39.742011187.5520%$37.752012197.55100%$7.552013207.55500%$1.512014217.551000%$0.762015227.552016237.552017247.552018257.552019267.552020277.552021287.552022297.552023307.552024317.552025327.552026337.552027347.552028357.552029367.552030377.552031387.552032397.552033407.552034417.552035427.552036437.552037447.552038457.552039467.552040477.552041487.552042497.552043507.552044517.552045527.552046537.552047547.552048557.552049567.552050577.552051587.552052597.552053607.552054617.552055627.552056637.552057647.552058657.552059667.552060677.552061687.552062697.552063707.552064717.552065727.552066737.552067747.552068757.552069767.552070777.552071787.552072797.552073807.552074817.552075827.552076837.552077847.552078857.552079867.552080877.552081887.552082897.552083907.552084917.552085927.552086937.552087947.552088957.552089967.552090977.552091987.552092997.552093100107.55

&FPage &P

Maturity Ques 8Sleeping Beauty Bonds of Different MaturityCash Flow per $100Present Values for 10 Year BondPresent ValuePresent ValueCalendarRelativeSleepingNappingInterestSleepingNappingInterestSleepingNappingYearYearBeautiesBeautiesRatesBeautiesBeautiesRatesBeautyBeauty199302%$339.20$149.852%$339.20$149.85199417.557.557.023%$243.78$138.813%$243.78$138.81199527.557.556.534%$186.99$128.794%$186.99$128.79199637.557.556.075%$150.61$119.695%$150.61$119.69199747.557.555.646%$125.76$111.416%$125.76$111.41199857.557.555.257%$107.85$103.867%$107.85$103.86199967.557.554.887.55%$100.00$100.008%$94.38$96.98200077.557.554.548%$94.38$96.989%$83.89$90.69200187.557.554.229%$83.89$90.6910%$75.50$84.95200297.557.553.9210%$75.50$84.9511%$68.64$79.682003107.55107.5551.9411%$68.64$79.6812%$62.92$74.862004117.5512%$62.92$74.8613%$58.08$70.432005127.5513%$58.08$70.4314%$53.93$66.362006137.5514%$53.93$66.3615%$50.33$62.612007147.5515%$50.33$62.6116%$47.19$59.162008157.5516%$47.19$59.1617%$44.41$55.982009167.5517%$44.41$55.9818%$41.94$53.042010177.5518%$41.94$53.0419%$39.74$50.322011187.5519%$39.74$50.3220%$37.75$47.802012197.5520%$37.75$47.802013207.552014217.552015227.552016237.552017247.55Present Value Pattern of 10 Year Bond2018257.55Interest RateNapping Beauties2019267.552020277.552%$149.852021287.553%$138.812022297.554%$128.792023307.555%$119.692024317.556%$111.412025327.557%$103.862026337.558%$96.982027347.559%$90.692028357.5510%$84.952029367.5511%$79.682030377.5512%$74.862031387.5513%$70.432032397.5514%$66.362033407.5515%$62.612034417.5516%$59.162035427.5517%$55.982036437.5518%$53.042037447.5519%$50.322038457.5520%$47.802039467.552040477.552041487.552042497.552043507.552044517.552045527.552046537.552047547.552048557.552049567.552050577.552051587.552052597.552053607.552054617.552055627.552056637.552057647.552058657.552059667.552060677.552061687.552062697.552063707.552064717.552065727.552066737.552067747.552068757.552069767.552070777.552071787.552072797.552073807.552074817.552075827.552076837.552077847.552078857.552079867.552080877.552081887.552082897.552083907.552084917.552085927.552086937.552087947.552088957.552089967.552090977.552091987.552092997.552093100107.55

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Maturity Ques 8

Napping Beauties

Chart339.1958516026149.8533467846243.7750192894138.8124229073186.9927464399128.7936800167150.6121710101119.6904240694125.7571966558111.4081349297107.84808789103.862969847594.377557095796.980463370583.89180279690.694396333375.5017778684.94581059168.637284358479.682149561662.9171106674.856507523658.07712942970.426973056153.928665389366.356054081450.333375627562.610173737447.187518920759.15922780744.411773146955.976195717941.944448208453.03679821839.736843785450.319195773337.750000751647.8037225349

&FPage &P100-year bonds10-year bondsInterest RatePresent ValuePresent Value of a 100-year and a 10-year Bond as a Function of the Interest Rate

30-Year Bonds Ques 10Sleeping Beauty 30-Year Bonds30- Year Bond30- Year ZeroPrice of Zero-Coupon BondCalendarRelativeCashAnnualCashAnnualYearYearFlowPVFlowPV7.55%7.55%$11.2619930$11.26199417.557.0200$12.11199527.556.5300$13.03199637.556.0700$14.01199747.555.6400$15.07199857.555.2500$16.21199967.554.8800$17.43200077.554.5400$18.75200187.554.2200$20.16200297.553.9200$21.692003107.553.6500$23.322004117.553.3900$25.082005127.553.1500$26.982006137.552.9300$29.022007147.552.7300$31.212008157.552.5300$33.562009167.552.3600$36.102010177.552.1900$38.822011187.552.0400$41.752012197.551.8900$44.902013207.551.7600$48.292014217.551.6400$51.942015227.551.5200$55.862016237.551.4200$60.082017247.551.3200$64.622018257.551.2200$69.492019267.551.1400$74.742020277.551.0600$80.382021287.550.9800$86.452022297.550.9100$92.98202330107.5512.11887.79100$100.00

DurationSleeping Beauty Calculation of DurationCalendarRelativeSleepingNapping30-Year30-YearInterestSleepingNapping30-Year30-YearYearYearBeautiesBeautiesBondZeroSleeping Beauties10-Year Bond30-Year Bond30-Year ZeroRatesBeautiesBeautiesBondZeroInterest7.55%7.55%7.55%7.55%RateDuration0.02339.1958516026149.8533467846224.3003283081490.1254892722(in Years)0.000.000.00014.247.3712.6430.000.03243.7750192894138.8124229073189.1820081401365.7595720262199300.05150.6121710101119.6904240694139.1997501186205.4156223281199417.557.557.5507.027.027.027.027.027.02000.06125.7571966558111.4081349297121.3354882848154.5740135973199527.557.557.5506.5313.056.5313.056.5313.05000.07107.84808789103.8629698475106.8249726509116.6270018125199637.557.557.5506.0718.216.0718.216.0718.21000.0894.377557095796.980463370594.933997495688.2266475389199747.557.557.5505.6422.575.6422.575.6422.57000.0983.89180279690.694396333385.103201637666.9140788061199857.557.557.5505.2526.235.2526.235.2526.23000.175.5017778684.94581059176.904059555950.8782174299199967.557.557.5504.8829.274.8829.274.8829.27000.1168.637284358479.682149561670.006415621538.7813638474200077.557.557.5504.5431.754.5431.754.5431.75000.1262.9171106674.856507523664.154431343929.6327366632