This week's topic is advanced capital budgeting and for your discussion response, you should identify a capital budgeting project and then discuss the elements outside of the traditional capital budgeting calculations that companies, managers, and employees have to consider prior to determining to accept or reject a project. An example of a case that includes the Baha Mar Resort is provided in the following paragraphs.

Capital Budgeting Gone Wrong: When the Financing for a Project Falls Through (Baha Mar)

According to Cohen, when the Baha Mar Resort is completed, it is estimated to create 5,000 Bahamian jobs and give a double-digit boost to the country's GDP. Cohen also stated that there was a disagreement between the owners of the resort and the state-owned Chinese construction company that had been hired to work on the resort. When progress fell behind the construction workers claimed that the founders owed them money and the Chinese-owned bank refused to release funds to finish the project. The Baha Mar filed for bankruptcy in the U.S., but the Bahamian Government determined that U.S. bankruptcy does not apply. Furthermore, the Bahamian Authorities suggested that an arrangement could be made to complete the project. The owners of the Baha Mar seemed to believe that this implied that the government may attempt to assume control of the Baha Mar's assets.

Cohen stated that Chow Tai Fook Enterprises (CTFE) may 'rescue' the beleaguered development project. Hartnell added that the CTFE agreed to open and operate certain portions of the resort prior to finalizing a deal on the terms for the purchase of the property with the China Export-Import Bank. This story is interesting because of all of the pieces that had to come together prior to completing this project. The injection of the Chinese State-Owned Bank and the contractual obligation to only employ a subsidiary of the China State Construction Engineering Corporation to complete the project were important contingencies. From the outside looking in, it seems as though the Chinese state-owned bank was providing favors to the CTFE and the original founder and developer Sarkis Izmirlian and the Bahamian people will eventually have to determine whether the sale to CTFE was in the best interest of the country or if it was a sell-out of the Bahamas to the Chinese.