Case Details

New World Development Company Limited (NWD) was a leading conglomerate based in Hong Kong. After more than 20 years of operations, the Group had expanded its core businesses to include property, infrastructure, services and telecommunications. From late 1997 to June 2001, the stock price performance of the Company had been abysmal. Its efforts at asset disposals to reduce gearing, while making additional investments in new businesses, had confused investors. Security analysts also blamed the Company for not keeping its promise to focus on its core business of property. This case requires students to conduct an objective assessment of NWD on both a divisional and a consolidated basis. Its provides sufficient information for them to compute the divisional cost of capital using the capital asset pricing model (CAPM), and to conduct a simple Economic Value Added (EVA) analysis.