Case Name :      Seagram Greater China: Office Relocation in Hong Kong

Authors :           Claude P. Lanfranconi, Geoff Crum

Source :             Ivey Publishing

Case ID :            99B018

Discipline :        Accounting

Case Length :    08 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

The vice president of finance must quickly address several choices concerning the proposed office relocation. His analysis will likely include discounted cash flow analysis (DCF) and the topics of capital asset pooling and tax benefits. This case compares and contrasts the concepts of DCF and net present value analysis with Seagram’s version of economic value added (EVA). Also serves the objective of providing a unique Asian focus for this type of decision. Office space location and the rent-versus-buy option are extremely important decisions faced by a multitude of managers in Hong Kong. The traditional wisdom in Hong Kong has been that buying property was more efficient–especially given the phenomenal appreciation of property values. However, it can serve to distract a firm from its core competencies and tie up working capital in non-producing assets. Finally, the case also provides a brief overview of capital asset pooling and depreciation tax law in Hong Kong. While the discussion is brief, it nevertheless provides an adequate first step towards further study in this area. Students from other areas of the world will also be interested in examining the differences between their country’s tax laws and Hong Kong’s.