Throughout the global economy, the global economic recovery will be slowdown in 2012, but will continue to show a slow growth in the word. (Show in Table1)
The toy market is in a period of sustained development. The current trend in toy sales is towards electronic toys and computer assisted learning. Electronic toys and merchandise from popular films and TV programs have seen reasonable growth. Advantages
HY invests heavily in the research and development of high-tech toys. Its video games are recognized as pioneering and price competitive as
similar as Japan.
It employs over 100 IT specialists and around 500 supportive staff, which
shows that HY has a strong R&D capital.
It can improve Jot’s product quality and achieve competitive edges over
the rivals for a bigger market share in the Asian market. Disadvantages
Fashion trends are difficult to predict. Toy market is highly seasonal. Financial Analysis
According to the price change of HY’s shares, we can make a predicted
simulation of HY’s shares .it has been a decline, but it will be increased in the coming years. (Show in table2)
Now we assume that the price of the HY’s shares doesn’t change. When
Jot has its investment payback, according to the Cash flow analysis (Shown in Table3). Payback period = 7.19 years When we use the valuation model PV=CF/ ((1+R) ^ n)
If CF =C$65000 R=10% N=7
Then PV=1267056.53
It means the period for recovery of the investment more than 7 years. Using the capitalization of income method of valuation,
If NPV<0 then the value of shares have been overvalued, and the investment will have no profit.
V=C1/ (1+R) +C2/ ((1+R) ^2) +…+C7/ ((1+R) ^7) =590909.1 NPV=VP 590909.1
-=
－650000 <0
If Jot offer up a 650,000 flow-through units to HY and purchase price of
C$0.12, Jot can have a 6% holding rate of return Recommendations
Though the value of shares is predicted to be increase in the coming years, the payback period is 7years, which means it’s hard for Jot to have a frequent cash flow for the operation of the company according to the statement of cash flow. Moreover, 6% holding rate of return is lower than 10%, and the NPV<0 which means in the short time, Jot couldn’t achieve its aim. Conclusions
7years is a long period for Jot to have its investment payback. And the rate of return is low than the expected rate. Though HY will have a good prospect for development, considered Jot wants a 10% after tax cash profit in each coming years and convert at least 21% of HY, Jot should not invest HY.
Jot’s marketing director resigned Analysis of issues
Firstly, as Jot’s marketing director Sonja Rosik has announced her resignation, Jot is facing the human resource challenge. Jot should employ a new marketing director to keep the company’s operation normally as quickly as it can. There is still 3 month for her to wait for the notice before she moving to the MF, So Jot has enough time to adjust this human resource change.
Secondly, it is a good way to ask Boris taken on the Marketing Director’s
responsibilities in addition to his role as Sales Director, because Boris used to be the two directors at the same time. This method can not only help Jot’s operation normally, but also reduce the cost to train another experienced director.
However, Boris was asking for salary compensation or else he might also turn to a competitor. If Boris turns to the competitors, 10% shares of Jot will be taken away with him, and the number of shares held in Jot will have a great change. More seriously, Jot may have to have a structure change. Recommendations
Firstly, Jon should promise salary raise to Boris .Considered being paid more than before and the friendships with Jon, Boris may stay in Jot for a certain time.
Secondly, we can’t make sure that he won’t leave Jot. As Boris owns 10%shares of Jot, we can deferred his bonus and reward in 5 years later according to the 5 years plan in Jot. The method is called “Golden Handcuffs” in the management. If Boris wants to leave Jot, he will pay for it in a great price.
Thirdly, to have more talent management personnel, Jot should offers further training to the employees and applies corporate strategy into HR area. When some emergency personnel changes happen, the company is able to appoint the suitable person to the position in a short time.
2010 2011 2012 2013 5.1 3.0 2.4 2.0 3.8 1.6 1.8 3.3 1.3 2.2 3.6 1.5 2.1 0.2 1.2 5.6 4.5 The world economic Developed countries America Euro zone Japan Emerging markets and developing countries The world trade 1.4 -0.4 2.2 5.3 3.2 4.5 -0.8 7.4 12.6 6.2 5.8 Table1. World economic growth trend from 2010 to 2013 from official data in the World Bank web. Note: The economic growth of 2013 is predicted.
0.450.40.350.30.250.20.150.10.0501234567年
Table 2The predicted trend of stock in HY
The Cash flow analysis of the investment in HY Investment period Cash flow Investment period Cash flow 0 -650000 5 1 65000 6 2 136500 7 3 215150 8 4 301665 9 396831.5 501514.65 616666.115 743332.7265 Table3
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