The Boston Museum is the proud owner of considerable art work including several

Question

The Boston Museum is the proud owner of considerable art work including several Monets. The museum was contacted by a casino in Las Vegas to loan about twenty of the Monets for a fee of $5 million. Such decisions are the responsibility of the Museum's Board of Directors. The Board is typically composed of several artists, philanthropists, leading legislators, corporate leaders, and internationally famous curators from other museums. Assume that you are a member of the Board of Directors of Boston Museum. Analyze your thought process in arriving at your decision whether or not to approve the loan. Question 1. Provide your rationale with respect to financial aspects of the proposal Question 2. Provide your rationale with respect to the reputation of the museum. Question 3. In case you approve the loan, what assurances would you seek from the casino in returning the art work in a safe condition? Question 4. How would you handle similar requests from other organizations such as other museums and other casinos? Justify your answers clearly

Explanation / Answer

a) Rationale to financial aspects of the proposal:

We need to take into financial statements of all monets and analyze them on how much revenue they are making and contributing towards the parent museum. Once we know the figures, we do the difference between profit we are making and how much we make if we give it to loan. If we are earning more in the latter than previous then we are good on financials.

b) Rationale with respect to reputation of museum:

Giving loan to a casino might decrease the reputation of museum, but we can add back some new concepts or ideas from casino owner in terms of marketing and pricing strategies which helps to boost Boston museums revenue. We need to take a stand whether the money we are making is netting off or worth more taking the risk of reputation loss.

c) In case we approve the loan, i will ask them to pay the refundable amount as an advance of the amount of value of each painting in the monument. I will also ask them to pledge a part of assets in casino (value equal to the assets of monuments) as a better risk handling technique.

d) I will always look at the reputation of the other organizations and charge paid by them to make enough profits for the risk undertaken by us. I would like to charge on dynamic basis i,e depending on location and worth of each monument, the fee varies which manages the risk.

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