Disney's Expansion in Dubai: Project Finance and Funding Sources

This report analyzes the importance of project finance for businesses, focusing on Disney's expansion in Dubai. It identifies various funding sources available to Disney, differentiating between long-term and short-term options, and evaluates the associated costs, including borrowing costs, promotional expenses, employee wages, licenses, insurance, research expenses, and technological costs. The report emphasizes the role of project finance in mitigating investment risk and facilitating private sector investment, particularly in large-scale Greenfield projects. It also highlights the significance of market mechanisms and regulatory reforms in shaping project finance strategies. This document is available on Desklib, a platform providing students with access to past papers and solved assignments.

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Integrated Business Challenge
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Table of Contents
1. Importance of Project Finance for Business...............................................................................2
2. Sources of Funds Available to Disney for Expansion.................................................................3
3. The Associated Cost Along with the Capital for Expansion.......................................................5
References:......................................................................................................................................6
Appendices:.....................................................................................................................................7

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1. Importance of Project Finance for Business
There has been a newer wave in raising the global interest for the project finance
considered as the tool of economic investment during the last twenty years. The importance of
project finance for business lies in the fact that it helps in financing newer investment through
structuring the finance around the operating assets and cash flow without the presence of
additional guarantees from the sponsor (Gatti 2013).
Figure 1: Three Approaches to Structured Project Finance
Source: (Harrison and Lock 2017)
The technique helps in alleviating the investment risk and thereby raises the finance at a
lower cost for the benefit of the investors and the sponsor. Although project finance has been in
use for quite some time particularly in the natural resource and the mining projects but it its
application in larger Greenfield projects have received serious attention. The change of attitude
towards the project finance is attributed to a certain factors, the primary among them being the

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reliance of most of the countries on the market mechanisms for guiding the economic activity
and on private sector for supplying investment. The larger focus on private sector necessitated
the primary regulatory reform that has led to the creation of newer market in the areas that
previously represented preserve of the government activity. On a similar note, the present
privatizations in the developing countries on a large scale for strengthening the economic growth
and stimulating the investment of the private sector has given additional impetus for structuring
project finance. This was the time when the governments also expressed willingness in providing
the incentives for encouraging the private investors into the newer sectors.
Project finance is designed for meeting the requirement of the specific project (Finnerty
2013). The repayment of the financing depends on the assets and the cash flow of project.
Investors belonging to different classes like the debt providers, equity holders and the quasi-
equity investors along with the sponsor bear the returns and the risk. However, one criterion for
the suitability of financing remains in the whether it will be able for standing along as the
economic and distinct legal entity. There are two types of project finance that includes the
limited recourse and non-recourse project finance. The first type of financing ensures permitting
the investors and creditors in providing some recourse to sponsor. The second type of financing
represents an arrangement under which the creditors and the investors responsible for financing
the project does not have the option of direct recourse to sponsors as expected traditionally.
2. Sources of Funds Available to Disney for Expansion
There exist varied sources of funding that provides necessary financing to Walt Disney
for its expansion in Dubai. Initially the company required huge investment capital for carrying
out the promotional procedure and marketing. This is to be noted that for the development of the

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business plan there is a requirement of proper infrastructure. However, Walt Disney has access to
two sources of finance, one includes long-term fund source and the other includes the short-term
fund source. The long-term source refers to the funding obtained for a period that usually
exceeds the one-year mark (Barton and Wiseman 2014). When a particular business borrows
from the bank through long-term methods, the loan is paid back within a time that is more than a
year. For instance, this might involve making payments based on twenty-year mortgage period.
On the other hand, short tern business finance represents the additional money that the business
requires for undertaking business for a short term that usually extends to a maximum time of a
year. Some of the primary sources of short-term finance include the trade credit, bank overdrafts,
credit card, factoring, bank loans and lease (Avanzi et al. 2015). Thus, depending on the
requirements of expansion procedure of business in Dubai, Walt Disney will adopt a specific
finance source.
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Figure: Sources of Finances
Source: (Avanzi et al. 2015)
3. The Associated Cost Along with the Capital for Expansion
The associated costs involve the following (Hutzschenreuter and Horstkotte 2013):
Cost of Borrowing: Business loans come with an interest payment. This is decided
before even starting a business since the cost of defaulting is quite high.
Promotion and Advertising: A newly introduced company cannot succeed without
undertaking necessary promotion. This implies that business promotion involves a step ahead of
placing only advertisements on newspaper as it also includes the aspect of marketing.
Expenses of the Employee: This involves the cost of the labor in the form of salaries,
benefits and wages.
Licence, Insurance and the Permit Fees: This represent the cost of covering the
customers, employees and the business assets from any sort of liabilities
Expenses for the Research: This implies the cost allotted for the market research firms
in aiding the business in the assessment process
The Technological Expenses: This involves the cost related to the information system,
software and the website required by the business for its expansion.

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References:
Avanzi, B., Bicer, I., de Treville, S. and Trigeorgis, L., 2013. Real options at the interface of
finance and operations: exploiting embedded supply-chain real options to gain
competitiveness. The European Journal of Finance, 19(7-8), pp.760-778.
Barton, D. and Wiseman, M., 2014. Focusing capital on the long term. Harvard Business
Review, 92(1/2), pp.44-51.
Finnerty, J.D., 2013. Project financing: Asset-based financial engineering. John Wiley & Sons.
Gatti, S., 2013. Project finance in theory and practice: designing, structuring, and financing
private and public projects. Academic Press.
Harrison, F. and Lock, D., 2017. Advanced project management: a structured approach.
Routledge.
Hutzschenreuter, T. and Horstkotte, J., 2013. Performance effects of international expansion
processes: The moderating role of top management team experiences. International Business
Review, 22(1), pp.259-277.

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Appendices:
Appendix 1: Three Approaches to Structured Project Finance
Appendix 2: Sources of Finances