Financing Options for a Large Casino/Hotel Project
MBA 503- Introduction to Finance and Accounting
Instructer: Cathy Young
University of Phoenix
Because the success of casino/resort hotels depends on getting started with the right business plan, it takes a motivated group to ensure success. The business plan will describe the company's financial plan for using the proceeds of the equity offering in a detailed budget showing inflows of capital and expected outflows. Preparing for an equity investment such as, financing to build a casino/resort hotel involves a significant amount of time and attention dedicated to generating a business, strategic and financial plan for the company. In this paper, we will discuss in detail the various options in building a casino/resort hotel. First, we will discuss the capital valuation model, which combines relative indicators for future performance with basic financial data such as revenue, variable, and fixed costs to value the business. Next, we will describe the characteristics and the cost of various debt and equity instruments since there is significant focus on the cost structure by the potential investor. The cost structure must line up with the requested equity investment or the offering will inevitably fail. In the third section, we will evaluate long-term finance alternatives and identify specific milestones that are recognized by the investment community and assuming that the company correctly forecasted the costs to achieve the designated milestones. A few other options we will discuss is the different sources of capital that are available, compare and contrast the various cash management techniques and finally, compare and contrast the various methods of short-term financing. Critique of Capital Valuation Models
When financing a large project such as a casino/resort hotel, evaluating the costs of capital is critical....