• Selected
• Entire List

Abstract:
This book presents 46 case studies in finance, targeted toward upper-level undergraduates and introductory and intermediate-level MBA students. The purpose of these cases is to afford the basis for classroom discussion of tools and concepts. The range of topics includes value creation, market efficiency, economic profit, financial analysis and forecasting, cost of capital, capital budgeting, dividend policy, equity issuance, capital structure management, derivative securities, and mergers and acquisitions. The spirit of these cases is to link the study of value creation with a respect for the administrative point of view, and an orientation toward capital markets. All of the cases are set in 1995 or later; 61 percent are new or updated since the third edition. The downloadable paper outlines the plan of the book and its table of contents.


Note: The downloadable document describes the book in more
detail with excerpts from the preface and table of contents. Also, an Instructor's Manual containing discussion outlines and case analyses is available on a restricted basis to university instructors upon request to Ms. Barbara Hari, McGraw-Hill/Irwin (mailto:Barbara_Hari@mcgraw-hill.com). A collection of spreadsheet files supporting student and teacher preparation of the cases is available to instructors adopting the book for classroom use.

Abstract:
Applied Mergers and Acquisitions aims to present a one-volume coverage of practice and research in a way that is both pragmatic and rigorous. This document gives an overview of the book and contains the table of contents, a description of associated software, an excerpt from the preface, and an excerpt from Chapter 1 - these give a sense of the perspective taken here. In brief, the book seeks to:

- Integrate topics and practices. Surveyed here are ethics, strategy, search, due diligence, valuation, accounting, tax, deal design, negotiation, post-merger integration, and leadership of a business development unit. By combining these aspects in one volume it is possible to show linkages among them and what these linkages mean for practitioners.

- Highlight best practices and state of the art. In particular, the book identifies seven new disruptive ideas that are likely to change practice.

- Marry research and practice. The book summarizes academic research findings that bear important insights and implications for practitioners. Case examples give practical illustrations of new ideas. The comprehensive list of writings about M&A that is contained in the book can help the practitioner and the scholar understand better the domain and limits of our knowledge.

- Promote self-paced discovery and continuing learning. M&A is a complex subject and the nexus of numerous disciplines. This book strives to make accessible the ideas in various areas and to lay the foundation for continued exploration. A workbook entitled, Applied Mergers and Acquisitions: Workbook, (Wiley, 2004) contains chapter summaries and problems with worked-through solutions. A CD-ROM contains templates for quantitative analysis of M&A transactions using approaches outlined in the book, additional written lectures dealing with legal aspects of M&A, and more problems with worked-through solutions.

Abstract:
Following the largest M&A wave in history, it is appropriate to assess the evidence on the profitability of this activity. One popular view is that merger activity is highly unprofitable. Does research sustain this view? This paper reflects on what it means for M&A to 'pay' and summarizes the evidence from 12 informal studies, 120 scientific studies from 1971 to 2003, and five surveys of the scientific evidence published in 1979, 1983, 1987, 1989, and 1992. This review comments on the several formal and informal research approaches and highlights findings for the broad activity as well as niches of special note. The mass of research suggests that target shareholders earn sizable positive market-returns, that bidders (with interesting exceptions) earn zero adjusted returns, and that bidders and targets combined earn positive adjusted returns. On balance, one should conclude that M&A does pay. But the broad dispersion of findings around a zero return to buyers suggests that executives should approach this activity with caution.

Mergers and Acquisitions, Valuation, Corporate Finance

Abstract:
This technical note offers an example of a thoroughly complete pitch book for use as a basis for class discussion and learning. Actual pitch books are almost never made available for public use. This presentation was prepared by a group of Darden students in April 2001 for a jury of M&A executives from United Technologies Corporation who judged this work to be of excellent quality, among the best they had seen in any setting. A separate validation of the deal concept is given in the final exhibit, which records the announcement by General Electric of its acquisition of Heller on July 30, 2001. In reviewing this document, the student must assess both its form and content, from the standpoints of both the presenter and the audience. Why is each exhibit and section included in the document? What analytical work underpins the exhibits? What might explain the presentation format? What oral comments might one offer in making this presentation to a group of executives?

mergers and acquisitions, Management Communications, investment analysis, valuation

Abstract:
SUBJECT AREAS: valuation, investment analysis, portfolio management, country analysis, emerging markets, development economics.

This paper gives an overview of research and practice issues in the valuation of assets in emerging markets. It introduces a special edition in Emerging Markets Review devoted to the topic. This volume emerged from a conference sponsored by The Batten Institute at the Darden Graduate Business School of University of Virginia, Association for Investment Management and Research (AIMR), and Emerging Markets Review. The analytic challenges outlined in this paper and special edition are immensely interesting to practitioners and scholars for what they reveal about emerging and developed markets. The colloquium surveyed business and research practices, stimulated critical reflection, and highlighted questions for future research.

Abstract:

SUBJECT AREA: classroom teaching.


The new term begins. You introduce yourself, describe the course, and pause to invite questions before starting to teach. It's a moment of buoyancy; you're ready to begin work. Then a student asks a brash question. "What qualifies you to teach this course?" Or "Have you personally done any of the deals (financings, investments, etc.) this course covers?" Or "Have you worked in this industry?" Or, "Do you consult in this area?" Or, "What practical work experience do you have?" Or the showstopper, "If you're so smart, why aren't you rich?" A stillness falls over the room as everyone recognizes that a not-so-subtle challenge has been issued. If you are a newly minted Ph.D., there may not be much work experience to discuss. Or as a senior professor, your work experience may not be quite that relevant or recent. You are on the spot to justify your presence. You briefly contemplate a response that is comparable in rudeness to the query. But instead you search for the right words. What should you say?

This column discusses the various origins of the brash question, reflects on some larger lessons for the classroom teacher, and suggests a path for responding.


[Past columns by Robert Bruner may be found by search at the
SSRN website at: http://papers.ssrn.com/sol3/search.taf

or by going to his Author Page at SSRN at:
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=66030]

Abstract:
"Deals from Hell" surveys failure in mergers and acquisitions, drawing on an extensive review of research, original study of 2,804 transactions, and detailed case studies of ten prominent failures. The conclusions challenge conventional wisdom about M&A and enrich our ability to anticipate failure and promote success. Insights from the book include these:

- M&A does pay for bidders, on average and over time. But the variance of returns is sizable: you cannot be terribly confident of hitting the average return simply by acquiring naively. Investors and managers should suppress overconfidence and prepare to be disappointed.

- The market for acquisitions is highly segmented; returns to investors vary significantly across the segments. For this reason, broad assertions about M&A success and failure are less meaningful. All M&A is local: pay attention to the peculiarities of the deal including its motives, design, context, and implementation.

- The detailed comparison of failure cases finds six elements in common. While these elements are individually widespread in the business environment, it is their convergence in the context of a merger that greatly elevates the likelihood of failure. Since merger failure results from a "perfect storm" of factors, failure prevention must attack the systemic combination of factors.

The detailed case studies consist of the following:
- Merger of the Pennsylvania and New York Central Railroads, 1968.
- Leveraged buyout of Revco Drug Stores, 1986.
- Acquisition of Columbia Pictures by Sony Corporation, 1989.
- Acquisition of NCR Corporation by AT&T Corporation, 1991.
- Renault's proposed merger with Volvo, 1993.
- Acquisition of Snapple by Quaker Oats, 1994.
- Mattel's acquisition of The Learning Company, 1999.
- Merger of AOL and Time Warner, 2001.
- Dynegy's proposed merger with Enron, 2001.
- Acquisition program of Tyco International 2002.
Each case study of failure is accompanied by one or more comparison cases that vary in some instructive way.

The downloadable document contains the foreword, table of contents, and introductory chapter.

Abstract:
On July 5 2001, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual-fund management firm, pored over analyst write-ups of Nike, Inc., the athletic shoe manufacturer. Nikes share price had declined significantly from the beginning of the year. Ford was considering buying some shares for the fund she managed, the NorthPoint Large-Cap Fund, which was invested mostly in Fortune 500 companies with an emphasis on value investing. Ford had read all the analyst reports that she could find about the June 28th meeting, but the reports gave her no clear guidance. She decided instead to develop her own discounted cash flow forecast to come to a clearer conclusion.

cost of capital, investment analysis, valuation

Abstract:
On July 5 2001, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual-fund management firm, pored over analyst write-ups of Nike, Inc., the athletic shoe manufacturer. Nikes share price had declined significantly from the beginning of the year. Ford was considering buying some shares for the fund she managed, the NorthPoint Large-Cap Fund, which was invested mostly in Fortune 500 companies with an emphasis on value investing. Ford had read all the analyst reports that she could find about the June 28th meeting, but the reports gave her no clear guidance. She decided instead to develop her own discounted cash flow forecast to come to a clearer conclusion.

cost of capital, investment analysis, valuation

Abstract:
CASE HAS A SPREADSHEET.These two cases consider the capital investment decisions to be made by executives of this large chemicals firm in January 2001. The â¬ÜAâ¬" case presents a go/no-go project evaluation regarding improvements to a polypropylene production plant. The â¬ÜBâ¬" case reviews the same project but from one level higher, where the executive faces an either/or investment decision between two mutually exclusive projects. The objective of the two cases is to expose students to a wide range of capital-budgeting issues which includes, among others, the identification of relevant cash flows, the critical assessment of a capital investment evaluation system, the classic â¬Scross-overâ¬? problem, in which project rankings disagree on the basis of net present value (NPV) and internal rate of return (IRR), and the assessment of real option value latent in managerial flexibility to change operating technologies.

capital budgeting, capital investment, relevant costs

Abstract:
CASE HAS A SPREADSHEET.These two cases consider the capital investment decisions to be made by executives of this large chemicals firm in January 2001. The â¬ÜAâ¬" case presents a go/no-go project evaluation regarding improvements to a polypropylene production plant. The â¬ÜBâ¬" case reviews the same project but from one level higher, where the executive faces an either/or investment decision between two mutually exclusive projects. The objective of the two cases is to expose students to a wide range of capital-budgeting issues which includes, among others, the identification of relevant cash flows, the critical assessment of a capital investment evaluation system, the classic â¬Scross-overâ¬? problem, in which project rankings disagree on the basis of net present value (NPV) and internal rate of return (IRR), and the assessment of real option value latent in managerial flexibility to change operating technologies.

capital budgeting, capital investment, relevant costs

Abstract:
This book presents 50 case studies and technical notes in finance, targeted toward upper-level undergraduates and introductory and intermediate-level MBA students. The purpose of these cases is to afford the basis for classroom discussion of tools and concepts. The range of topics includes value creation, market efficiency, economic profit, financial analysis and forecasting, cost of capital, capital budgeting, dividend policy, equity issuance, capital structure management, derivative securities, and mergers and acquisitions. The spirit of these cases is to link the study of value creation with a respect for the administrative point of view, and an orientation toward capital markets. Three-quarters of the cases are set in 2000 or after; half the cases are set outside of the United States or draw significantly on international issues; 37 percent are new or seriously updated since the fourth edition. A new chapter addresses ethics in finance.

Note: The downloadable document describes the book in more detail with excerpts from the preface and table of contents. Also, an Instructor's Manual containing discussion outlines and case analyses is available on a restricted basis to university instructors upon request to Ms. Barbara Hari, McGraw-Hill/Irwin (mailto:Barbara_Hari@mcgraw-hill.com). A collection of spreadsheet files supporting student and teacher preparation of the cases is available to instructors adopting the book for classroom use.

Abstract:
"It's so daunting. I have to listen to the students - just figuring out what I want to say is hard enough. The loss of control doesn't feel right. I just don't know how to begin teaching with cases."

Words like these are spoken regularly both by newly-minted Ph.D.s, by veteran lecturers, and anyone confronting the prospect of teaching by the discussion method, using case studies. Experienced case teachers make it seem easy; the problem is how to get started. This column offers some advice of my own, as well as suggestions from a panel of contributors.

Abstract:
How you assess an M&A deal or the whole flow of M&A activity depends on your frame of reference, on beliefs that help you decide whether specific deals represent the average or what statisticians call the tails of the distribution. This frame of reference is a hugely important filter for decision-makers and their advisers, and is typically built on a blend of personal experience, anecdotes, conventional wisdom, and facts. The aim of this chapter is to enrich your frame of reference about success and failure in M&A with the findings of scientific research. Surveyed here are the results of over 130 studies of returns from merger. On average, acquisitions compensate buyers for their cost of funds - in this sense, it appears that M&A pays. But around the average is significant variation in outcomes. This chapter summarizes findings on 18 factors that help to explain the variation in returns to buyers from M&A. One practical implication is that all M&A is local which means that the executive's choices about strategy, deal design, governance, and tailoring of investment opportunities will have a meaningful influence on the success or failure of acquisitions.

Abstract:
In January 2001, the senior-management committee of this company has to decide which major projects should be funded for implementation by the company starting in 2001. The board of directors has arbitrarily set a limit of ¬120 million to be spent on capital projects in 2001. Various managers, however, have proposed projects totaling ¬316 million. The task for the student is to evaluate the completed discounted-cash-flow (DCF) analyses that the case presents, together with qualitative factors (mainly strategic considerations and internal politics of the company), and to choose the projects to be approved. The main objectives of this case are (in descending order): (1) to explore the problem of resource allocation within corporations; (2) to illustrate and assess the impact of capital rationing on capital-investment decisions; (3) to exercise and interpret the implications of classic tools of investment analysis (e.g., net present value [NPV], internal rate of return [IRR], payback), and to consider possible adjustments for differences among the projects in risk (e.g., through the use of risk-adjusted discount rates), size (e.g., through the profitability index), and life (e.g., through using equivalent annuities, replacement chains, or both); (4) to consider the impact of behavioral influences on financial decision making.

capital budgeting, capital investment, cash flow, profitability analysis

Abstract:
In January 2001, the senior-management committee of this company has to decide which major projects should be funded for implementation by the company starting in 2001. The board of directors has arbitrarily set a limit of ¬120 million to be spent on capital projects in 2001. Various managers, however, have proposed projects totaling ¬316 million. The task for the student is to evaluate the completed discounted-cash-flow (DCF) analyses that the case presents, together with qualitative factors (mainly strategic considerations and internal politics of the company), and to choose the projects to be approved. The main objectives of this case are (in descending order): (1) to explore the problem of resource allocation within corporations; (2) to illustrate and assess the impact of capital rationing on capital-investment decisions; (3) to exercise and interpret the implications of classic tools of investment analysis (e.g., net present value [NPV], internal rate of return [IRR], payback), and to consider possible adjustments for differences among the projects in risk (e.g., through the use of risk-adjusted discount rates), size (e.g., through the profitability index), and life (e.g., through using equivalent annuities, replacement chains, or both); (4) to consider the impact of behavioral influences on financial decision making.

capital budgeting, capital investment, cash flow, profitability analysis

Abstract:
In January 2001, the chief executive of this small yarn-production company in India must resolve a surprising cash shortage. The task for the student is to evaluate the causes of this shortage (using a completed "base-case" forecast given in the case) and assess the usefulness of various possible remedies suggested by managers in the company. In essence, the company is unable to liquidate a seasonal working-capital loan for the requisite 30 days each year. This difficulty arises from two classic causes: (1) secular growth of the company and (2) declining profitability. Possible remedies include reducing inventory through more efficient transportation and warehousing, reducing credit terms to customers, being supplied raw materials on a just-in-time raw materials, switching from seasonal to level production, improving profitability, decreasing dividends, and reducing sales growth. The objectives of the case are threefold: (1) To explore a range of issues in working capital management with a primary focus on accounts receivable and inventory. (2) To extend students skills in financial-statement modeling and analysis. This case demonstrates the technique of forecasting with T-accounts, which may be contrasted with percent-of-sales forecasting illustrated in other cases. (3) To illustrate some of the challenges in financial (and general) management of firms in developing countries. These challenges include transportation and logistical problems, the availability of credit to merchants and consumers, high real rates of growth, tax practices of governments, and dramatic swings in demand induced by local customs and holidays.

cash flow, forecasting, inventory management

Abstract:
In January 2001, the chief executive of this small yarn-production company in India must resolve a surprising cash shortage. The task for the student is to evaluate the causes of this shortage (using a completed "base-case" forecast given in the case) and assess the usefulness of various possible remedies suggested by managers in the company. In essence, the company is unable to liquidate a seasonal working-capital loan for the requisite 30 days each year. This difficulty arises from two classic causes: (1) secular growth of the company and (2) declining profitability. Possible remedies include reducing inventory through more efficient transportation and warehousing, reducing credit terms to customers, being supplied raw materials on a just-in-time raw materials, switching from seasonal to level production, improving profitability, decreasing dividends, and reducing sales growth. The objectives of the case are threefold: (1) To explore a range of issues in working capital management with a primary focus on accounts receivable and inventory. (2) To extend students skills in financial-statement modeling and analysis. This case demonstrates the technique of forecasting with T-accounts, which may be contrasted with percent-of-sales forecasting illustrated in other cases. (3) To illustrate some of the challenges in financial (and general) management of firms in developing countries. These challenges include transportation and logistical problems, the availability of credit to merchants and consumers, high real rates of growth, tax practices of governments, and dramatic swings in demand induced by local customs and holidays.

cash flow, forecasting, inventory management

Abstract:
In July 2001, a new CEO joins this small manufacturer of CD-ROMs and DVDs to discover that the firm is in the midst of a financial crisis, induced by rapid growth. The CEO asks an analyst for help with five tasks: (1) review historical performance of the firm; (2) forecast financing requirements for the next two years; (3) exercise the forecasting model to identify â¬Skey driverâ¬? assumptions; (4) estimate Star Riverâ¬"s weighted average cost of capital; and (5) analyze a proposed investment in a packaging machine. The analyst must offer insights and recommendations based on the work. The aim of the case is to exercise studentsâ¬" abilities in financial forecasting and analysis and in the analysis of capital projects. Generally, the case offers a good omnibus review of foundational tools and concepts.

capital investment, forecasting, ratio analysis

Abstract:
SUBJECT AREAS: valuation, investment analysis, portfolio management, country analysis, emerging markets, development economics.

This collection of two CD-ROMs presents interviews with leading scholars and practitioners on the subject of valuing assets in emerging markets. Featured interviews include, Michael A. Duffy, Ph.D., CFA, Managing Director, Emerging Markets Management, Vihang Errunza, Bank of Montreal Chair in Finance and Baking, Faculty of Management, McGill University, Marc Faber, Ph.D., Managing Director, Marc Faber Limited, Kristin J. Forbes, Mitsubishi Associate Professor of International Management, Sloan School of Management, and former deputy assistant secretary for the US Department of the Treasury , Campbell R. Harvey, J. Paul Sticht Professor of International Business, Fuqua School of Business, Duke University, George R. Hoguet, CFA, Head, Active Emerging Markets, Global Active Equity, State Street Global Advisors, Mark Mobius, Ph.D., Managing Director, Templeton Asset Management, Mehran Nakjavani, Executive Director and Co-Head of Emerging Markets, UBS Global Asset Management, Marc Zenner, Ph.D., CFA, Salomon Smith Barney/Citigroup). The CDs also contain pdf files of papers and presentations given at the conference, "Valuation in Emerging Markets," at the Batten Institute of the Darden Graduate Business School, University of Virginia, on May 28-30, 2002. The downloadable document gives a detailed outline of the interviews and papers contained on the CD-ROM.

These CD-ROMs serve at least three objectives:

- Provide a learning resource on valuation in emerging markets usable in educational settings such as BBA, MBA, and doctoral courses.

- Support executive and professional training for self-learners and distance learners.

- Rapidly disseminate state-of-the-art ideas to scholarly researchers and professionals focusing on valuation and emerging markets.

The Batten Institute will hold an annual conference on investing in emerging markets. The next conference will be held in Charlottesville, Virginia from the evening of May 28 to noon, May 30, 2003. The focus of this next conference will be corporate governance and organization as they affect the pricing of equities in emerging markets. Michael Jensen will be the keynote speaker at this next conference. Program information and registration details may be found at the Batten Institute website.

Abstract:
On May 24, 2005, Warren Buffett, the chair and chief executive officer of Berkshire Hathaway Inc., announced that MidAmerican Energy Holdings Company, a subsidiary of Berkshire Hathaway, would acquire the electric utility PacifiCorp. In Buffetts largest deal since 1998, and the second largest of his entire career, MidAmerican would purchase PacifiCorp from its parent, Scottish Power plc, for $5.1 billion in cash and $4.3 billion in liabilities and preferred stock. The acquisition of PacifiCorp renewed public interest in its sponsor, Warren Buffett. In many ways, he was an anomaly. What were the key principles that guided Buffett? Could these be broadly applied in the 21st century, or were they unique to Buffett and his time? From an understanding of these principles, analysts hoped to illuminate the acquisition of PacifiCorp. What were Buffetts probable motives in the acquisition? What did Buffetts offer say about his valuation of PacifiCorp, and how would it compare with valuations for other regulated utilities? Would Berkshires acquisition of PacifiCorp prove to be a success? How would Buffett define success?

cash flow, efficient markets, investment analysis, valuation

Abstract:
On May 24, 2005, Warren Buffett, the chair and chief executive officer of Berkshire Hathaway Inc., announced that MidAmerican Energy Holdings Company, a subsidiary of Berkshire Hathaway, would acquire the electric utility PacifiCorp. In Buffetts largest deal since 1998, and the second largest of his entire career, MidAmerican would purchase PacifiCorp from its parent, Scottish Power plc, for $5.1 billion in cash and $4.3 billion in liabilities and preferred stock. The acquisition of PacifiCorp renewed public interest in its sponsor, Warren Buffett. In many ways, he was an anomaly. What were the key principles that guided Buffett? Could these be broadly applied in the 21st century, or were they unique to Buffett and his time? From an understanding of these principles, analysts hoped to illuminate the acquisition of PacifiCorp. What were Buffetts probable motives in the acquisition? What did Buffetts offer say about his valuation of PacifiCorp, and how would it compare with valuations for other regulated utilities? Would Berkshires acquisition of PacifiCorp prove to be a success? How would Buffett define success?

cash flow, efficient markets, investment analysis, valuation

Abstract:
The case presents the student with financial ratios for eight pairs of unidentified companies and asks them to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce students to financial ratio analysisin particular, the range of ratios and the insights each one affords. This case presumes that students have already been introduced to the definitions of various financial ratios through other readings or lectures. The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance. For those reasons, this case is a good springboard into subsequent classes, which deal with the interaction of strategy and financial performance.

financial ratios, strategy formulation

Abstract:
The case presents the student with financial ratios for eight pairs of unidentified companies and asks them to mate the description of the company with the financial profile derived from the ratios. The primary objective of this case is to introduce students to financial ratio analysisin particular, the range of ratios and the insights each one affords. This case presumes that students have already been introduced to the definitions of various financial ratios through other readings or lectures. The structured exploration of pairs of companies within an industry affords a number of important insights into strategy and financial performance. First, the economics of individual industries account for significant variations in financial ratios because of differences in technologies, product characteristics, or competitive structures. Second, financial performance results from managerial choices: within industries, the wide variation in financial ratios is often a result of the differences in corporate strategy in marketing, operations, and finance. For those reasons, this case is a good springboard into subsequent classes, which deal with the interaction of strategy and financial performance.

financial ratios, strategy formulation

Abstract:
Overview

This course is intended to provide a capstone experience in corporate finance for second-year MBA students, and for upper-level law students. Nicknamed "Doing Deals" by the students, the course consists of a series of simulations in which teams of students attempt to consummate corporate financial transactions such as a friendly bilateral merger, a reorganization in bankruptcy, and a hostile takeover. Grades are based on written documents and oral presentations prepared for the transactions, and on peer reviews and faculty observations of student contributions during negotiations. The interdisciplinary combination of law and business students on transaction teams emulates the real world, and challenges students in both schools to reach beyond their narrow disciplines to contribute effectively to the deal-doing process. Lawyers must focus on the needs of the clients. Business students must engage legal expertise to structure and consummate value creating transactions. Though challenging and time-intensive for the students, this course has been among the highest rated offerings at both schools since its inception.

DOWNLOAD DOCUMENT BELOW FOR COMPLETE COURSE DESIGN.

Abstract:
In October 2005, the chief financial officer of a telecommunications company must fashion a response to a corporate raider who claims that a major business segment of this company should be sold because it is not earning a satisfactory rate of return. The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a risk-adjusted hurdle-rate system. The tasks for the student are to resolve the debate, estimate the weighted-average costs of capital (WACC) for Teletechâ¬"s two business segments, and respond to the raider. The case was prepared to serve as part of an introduction to estimating investorsâ¬" required rates of return. It would best follow one or two class sessions introducing techniques for estimating WACC. The numerical calculations required are light, though some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb.â¬?

cost of capital

Abstract:
In October 2005, the chief financial officer of a telecommunications company must fashion a response to a corporate raider who claims that a major business segment of this company should be sold because it is not earning a satisfactory rate of return. The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a risk-adjusted hurdle-rate system. The tasks for the student are to resolve the debate, estimate the weighted-average costs of capital (WACC) for Teletechâ¬"s two business segments, and respond to the raider. The case was prepared to serve as part of an introduction to estimating investorsâ¬" required rates of return. It would best follow one or two class sessions introducing techniques for estimating WACC. The numerical calculations required are light, though some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb.â¬?

cost of capital

Abstract:
In mid September 2005, Ashley Swenson, the chief financial officer of this large CAD/CAM (computer aided design and manufacturing) equipment manufacturer must decide whether to pay out dividends to the firms shareholders, or repurchase stock. If Swenson chooses to pay out dividends, she must also decide on the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising, and change its corporate name to reflect its new outlook. The case serves as an omnibus review of the many practical aspects of the dividend and share buyback decisions, including (1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share repurchase decisions. This case can follow a treatment of the Miller Modigliani dividend-irrelevance theorem and serves to highlight practical considerations in setting dividend policy.

corporate financial strategy, capital markets

Abstract:
In mid September 2005, Ashley Swenson, the chief financial officer of this large CAD/CAM (computer aided design and manufacturing) equipment manufacturer must decide whether to pay out dividends to the firms shareholders, or repurchase stock. If Swenson chooses to pay out dividends, she must also decide on the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising, and change its corporate name to reflect its new outlook. The case serves as an omnibus review of the many practical aspects of the dividend and share buyback decisions, including (1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share repurchase decisions. This case can follow a treatment of the Miller Modigliani dividend-irrelevance theorem and serves to highlight practical considerations in setting dividend policy.

corporate financial strategy, capital markets

Abstract:
In March 1997, the board chair of this small steel mill is pondering how to finance the growth of his firm: either with an initial public offering of equity or a private placement of 8-year senior notes with warrants. The task for the student is to sort out the comparative advantages and disadvantages of each alternativeincluding valuing the possible securitiesand recommend a course of action.

valuation, warrants, initial public offering, voting paradox

Abstract:
In March 1997, the board chair of this small steel mill is pondering how to finance the growth of his firm: either with an initial public offering of equity or a private placement of 8-year senior notes with warrants. The task for the student is to sort out the comparative advantages and disadvantages of each alternativeincluding valuing the possible securitiesand recommend a course of action.

valuation, warrants, initial public offering, voting paradox

Abstract:
In June 2002, a managing director of an â¬Sactive investorâ¬? hedge fund is considering the possible gains from increasing the debt capitalization of The Wm. Wrigley Jr. Company. Wrigley has been conservatively financed, and at the date of the case, carries no debt. The tasks for the student are to: ⬢ Estimate the potential change in value from re-levering Wrigley using adjusted present value analysis; ⬢ Assess the impact on weighted average cost of capital, earnings per share, the credit rating of the firm, and voting control of the Wrigley family;⬢ Consider the merits of dividend or share repurchase as a means of returning cash to shareholders.The central teaching objective of the case is to explore the financial effects of capital structure change. Key here is the trade-off between the tax benefits of debt and the associated costs in the form of financial distress and loss of flexibility. Related issues include signaling to investors, clientele effects (control considerations for the Wrigley family), and incentives created for directors and managers. Finally, the case affords a comparison of dividends and share repurchases.

capital structure, leverage, ratio analysis

Abstract:
In June 2002, a managing director of an â¬Sactive investorâ¬? hedge fund is considering the possible gains from increasing the debt capitalization of The Wm. Wrigley Jr. Company. Wrigley has been conservatively financed, and at the date of the case, carries no debt. The tasks for the student are to: ⬢ Estimate the potential change in value from re-levering Wrigley using adjusted present value analysis; ⬢ Assess the impact on weighted average cost of capital, earnings per share, the credit rating of the firm, and voting control of the Wrigley family;⬢ Consider the merits of dividend or share repurchase as a means of returning cash to shareholders.The central teaching objective of the case is to explore the financial effects of capital structure change. Key here is the trade-off between the tax benefits of debt and the associated costs in the form of financial distress and loss of flexibility. Related issues include signaling to investors, clientele effects (control considerations for the Wrigley family), and incentives created for directors and managers. Finally, the case affords a comparison of dividends and share repurchases.

capital structure, leverage, ratio analysis

Abstract:
Set in May 2000, these cases reflect the separate perspectives of the CEOs as they approach the negotiations of TSE International to acquire Yeats Valves. The task for the student is to complete a valuation analysis of the target and buyer, and to negotiate a price and exchange ratio with the counterparty. Each case contains a financial forecast only for that side; therefore, an important element in the negotiation is to obtain the private information of the other side, analyze it, and successfully negotiate terms of acquisition. The cases are relatively simple, and are offered as a first exercise in the valuation of the firm, and negotiation of an acquisition. They may be taught singly in usual case-discussion fashion, or combined into a joint-negotiation exercise where students are assigned parts to play. Used in a bilateral bargaining exercise, two teams of students are designated, each team representing one side of the negotiation and receiving a case designed for that team. The bargaining exercise provides a particular opportunity for joint teaching among instructors in finance, strategy, human behavior, and negotiation.

bargaining and negotiating, valuation, exchange ratio

Abstract:
This case allows students to observe two competing businesses transform themselves over time. By following the competitive actions and reactions over more than 10 years, students gain an appreciation for how rivals raise the competitive ante, search for new ways to add customer value, and come to realize that sustaining a competitive advantage is difficult.

competitive analysis, competitive decision making, competitive dynamics, customer service

Abstract:
This case allows students to observe two competing businesses transform themselves over time. By following the competitive actions and reactions over more than 10 years, students gain an appreciation for how rivals raise the competitive ante, search for new ways to add customer value, and come to realize that sustaining a competitive advantage is difficult.

competitive analysis, competitive decision making, competitive dynamics, customer service

Abstract:
In 2002, a money manager is considering how to vote her shares in Hewlett-Packard on the proposal to merge with Compaq. The A case presents information about the strategic and financial motivations of the merger. Included are completed valuations of both HP and Compaq and detailed summaries of the leading advocate (Carly Fiorina) and critic (Walter Hewlett). The tasks for the student are to value the prospective synergies in the deal and critically assess the strategic arguments (pro and con). The B case (UVA-F-1451) affords a detailed examination of the terms of the proposed merger. The tasks for the student are to critically assess the specific design of the deal and its impact on shareholders. Of particular interest are the impact on earnings per share (i.e., EPS dilution), the governance of the new firm, and whether this is, indeed, a merger of equals. The C case (UVA-F-1452) describes the outcome of the proxy contest. The task for the student is to evaluate the strategies of each side in communicating with shareholders and presenting arguments. The objectives of the case module are to expose students to the mechanics of proxy contests, exercise skills in valuation and strategic analysis, and critically evaluate deal terms. The A and B cases can be taught in sequential classes or in one class. The C case is typically distributed at the end, followed by a brief discussion.

mergers and acquisitions, valuation, post merger integration

Abstract:
This case may be taught singly or used as a merger-negotiation exercise with "Chrysler Corporation: Negotiations between Daimler and Chrysler" (UVA-F-1240). Set in February 1998, the case places students in the position of negotiators for the company; their task is to value both firms, assess the potential earnings dilution of a combination, and negotiate a detailed agreement with their counterpart. The case can be used to explore such interesting negotiation issues as determination of a share-exchange ratio, treatment of major stockholders, and structuring a deal. Also, the case and exercise can be used to spark a discussion of acquisition in comparison with strategic alliance, or other less formal models of combination.

mergers and acquisitions, strategic alliance, negotiation, valuation, cross-border investment

Abstract:
This case may be taught singly or used as a merger-negotiation exercise with "Chrysler Corporation: Negotiations between Daimler and Chrysler" (UVA-F-1240). Set in February 1998, the case places students in the position of negotiators for the company; their task is to value both firms, assess the potential earnings dilution of a combination, and negotiate a detailed agreement with their counterpart. The case can be used to explore such interesting negotiation issues as determination of a share-exchange ratio, treatment of major stockholders, and structuring a deal. Also, the case and exercise can be used to spark a discussion of acquisition in comparison with strategic alliance, or other less formal models of combination.

mergers and acquisitions, strategic alliance, negotiation, valuation, cross-border investment

Abstract:
These two cases consider the capital-investment decisions facing executives of this large chemicals firm in January 2001. The A case (UVA-F-1351) presents a go/no-go project evaluation regarding improvements to a polypropylene production plant. The B case reviews the same project but from one level higher, where the executive faces an either-or investment decision between two mutually exclusive projects. The objective of the two cases is to expose students to a wide range of capital-budgeting issues, including the identification of relevant cash flows; the critical assessment of a capital-investment evaluation system; the classic "crossover" problem, in which project rankings disagree on the basis of net present value (NPV) and internal rate of return (IRR); and the assessment of real-option value latent in managerial flexibility to change operating technologies.

capital budgeting, capital investment, relevant costs

Abstract:
Mrs. Teasdale: "I was with my husband to the very end."

Groucho Marx: "Huh! No wonder he passed away."

Mrs. Teasdale: "I held him in my arms and kissed him."

Groucho Marx: "Oh, I see. Then it was murder."
-- Duck Soup, 1933

"This I conceive to be the chemical function of humor: to change the character of our thought."
-- Lin Yutang

In his classic film, Duck Soup, Groucho Marx transforms a widow's conventional words of sorrow into a take-off on the American phrase, "If looks could kill..." He shows how humor can change the way one thinks about problems and situations. Lin Yutang calls the transformational effect of humor, "chemical," suggesting the effect of a catalyst, perhaps silent but inexorable and often dramatic. Teaching is all about transforming a student's thinking. Therefore, humor belongs in the teaching toolkit, and deserves to be used frequently.

The problem is that the substance of what most instructors have to teach isn't very funny. Effective use of humor, therefore, must rely on delivery. Nothing in one's professional training prepares for this. Yet great teachers display the ability to use humor effectively in the pursuit of learning. Where does one acquire such skills? How should humor be used? What traps are to be avoided? This column reflects on these and related questions.

Abstract:
The question, ("How much work . . . ?") arises at inopportune moments and carries shadings of complaint, rebuke, resistance, and negotiation from the student. You may be just launching the course. Or perhaps the course has entered a stretch of heavy lifting. Or the students need to extend their reach in order to grasp a great idea. You size up the student and see a novice who is clueless and thrashing about, or a gifted amateur-type who feigns indifference about making an effort, or an education theorist who argues that "less is more," or a night-school student who is juggling job, family, and education. Perhaps the student points to the supposedly low level of work required in the course next door (or the course last year or at another school) as a benchmark for how much one should prepare in your course now. You have made a reasonable effort to align the workload of the course with the course credit, but the question suggests you failed. You value education through self-learning, but the student seems to want to get it on the cheap. You remember the long lonely self-preparation of doctoral studies, or some take-no-prisoners experiences of professional life: negotiating for relief was not a possibility, and complaint would land you on the street. You want to remain in control of your own course, and resent the attempt to bargain for a revision in terms. You would love to at least ignore the question, but can't. How you respond has big implications since decent student preparation is the sine qua non of a successful class and course. This column offers some ideas, resources, and a hypothetical response.

Abstract:
Set in December 2000, immediately following the merger announcement between PepsiCo Inc. and the Quaker Oats Company, this case asks students to examine the implications of the merger for the rivalry between Coca-Cola Co. and PepsiCo, and for value creation by each firm. Because the merger would allow PepsiCo to control Gatorade, which held an 83% share in the sports drink market, PepsiCo would further strengthen its already-wide lead over Coca-Cola Co. in the noncarbonated drinks segment. Would Coca-Colas historically stellar performance in terms of value creation be threatened by the merger? The case asks students to estimate EVA TM (Economic Value Added) from 2001 to 2003, and provides income statement and balance sheet forecasts to aid in this task. Students also need to determine each companys weighted average cost of capital (WACC) in order to estimate EVA. The primary objective of this case is to introduce students to the concepts and calculation of WACC and EVA.

cost of capital

Abstract:
Writing good business case studies can be learned but doing so is never simple. So where should one begin with the seemingly daunting task of becoming a case writer? Our aim in this note is to offer a brief overview that can help to jump-start one's case writing efforts. We offer some thoughts on the ingredients of a great case and how you can create one. Our hope is to stimulate more case teachers to embark on the case writing adventure.

Abstract:
A student writes an exam that follows your lecture notes perfectly, but misses a critical variation in the exam
question causing the results to err markedly. Another student recites a formula from memory, but cannot interpret it. A third student, a technician, reliably offers numerical analysis in class, but rarely questions assumptions or recommends decisions. A fourth student usually approaches you after class to verify "the right answer" to the case discussion. A fifth student uses student notes based on your discussion of the same case last year, and considers copying a paper from the Internet for the final paper in your course. These behaviors challenge the teacher who cares about helping the student master subjects for professional life. A variety of forces drive these behaviors, but they probably have in common what social psychologist Ellen J. Langer calls mindlessness. If "professional mastery" means anything, it must include the ability to generate original work, to accommodate expected variations in problems, to reach outside of zones of familiarity (such as "the numbers"), to focus on process rather than outcomes, or to accept the possibility of no single right answer - all of this requires mindful learning. This column discusses mindless learning, recommends some readings, and suggests ways of building a more mindful learning attitude among students.

Abstract:
Many instructors struggle with the role of rapport in teaching. For some, the response is a cool and distant teaching style. This essay argues that a style of appropriate warmth can promote student learning. It offers definitions, examples, and implications for the instructor.

Abstract:
This note is intended to provide an interactive illustration of the Modigliani-Miller theory of the effect of debt tax shields on the value of the levered firm.

debt policy, financial policy, leverage, liability management, tax issues

Abstract:
This note is intended to provide an interactive illustration of the Modigliani-Miller theory of the effect of debt tax shields on the value of the levered firm.

debt policy, financial policy, leverage, liability management, tax issues

Abstract:
The general objective of this case is to exercise students' skills in estimating a weighted-average cost of capital and cost of equity. The specific need to estimate a segment WACC draws out students' abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Thus, the case provides a complete menu of capital cost estimation opportunities.

capital asset pricing model, capital budgeting, capital investment, competitive analysis, cost of capital, valuation

Abstract:
The general objective of this case is to exercise students' skills in estimating a weighted-average cost of capital and cost of equity. The specific need to estimate a segment WACC draws out students' abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Thus, the case provides a complete menu of capital cost estimation opportunities.

capital asset pricing model, capital budgeting, capital investment, competitive analysis, cost of capital, valuation

Abstract:
SUBJECT AREA: classroom teaching.

"Eighty percent of the art of life is showing up." -- Woody Allen

Someone asked Henry Fonda to offer a sound-bite for the most important thing that a young actor should know. Fonda replied, "How to become an old actor." In the highly competitive world of the theatre, becoming an old actor involves more than just showing up for work. There is no guarantee of getting a booking. The critics have a short memory. To approach each new role afresh takes energy and inspiration. In this light, Woody Allen's famous quip seems like dubious advice for the development of professionals. Markets for professional talent do not give much weight simply to showing up. Consider the experience of baseball player, Cal Ripken, who played 2,632 consecutive games over a 20 year career, setting a new record. What the fans celebrate about him is not simply that he "showed up" but that he played consistently well enough for the coaches to put him in the game time after time. The relevant question for teachers is how to achieve a similar kind of consistency? Renewal involves more than getting a good night's sleep or mastering basic classroom techniques. If it were easy, we would all be Cal Ripkens in our respective fields. The challenge must be in what to renew, and how. Crafting a process of self-renewal and growth is at the heart of becoming an old actor, an old baseball player, and an old teacher. My previous columns have emphasized that great professionals carry a learning attitude into their work, and fasten onto interesting variations as exercises in maintaining a keen edge. This month's column offers a "top ten" list of experiences a teacher can use to renew and grow over time.

Abstract:
This note reflects on the role of ethics in the field of finance.

ethical issues, finance, introduction

Abstract:
This note reflects on the role of ethics in the field of finance.

ethical issues, finance, introduction

Abstract:
In 1989, the Walt Disney Company financed its major European theme park and real estate development using a variety of financing tools and techniques that, when bundled together, amounted to a project financing. The case recounts the details of this financing and invites students to evaluate the financing from various standpoints, including those of the Walt Disney Company, the government of France, European equity investors, and European banks. The resulting opinion about the attractiveness of the project ultimately hinges on beliefs about European market demand for an American-style theme park. The case may be used to exercise students' skills in valuation analysis, to illustrate techniques for financing major real-property projects, and to explore the creation and transfer of wealth in such projects.

financial policy, forecasting, international business, project finance, restructuring, international case, diversity case, valuation, international

Abstract:
This study explores the value of control and marketability rights and illuminates how discounts for non-marketability and lack of control might be estimated. Such discounts are prominent issues in corporate valuation and shareholder litigation. Using simulation analysis, the study reports estimated discounts using conventional assumptions and assesses the relative effects of two different aspects of control: strategic flexibility (the right to change the strategy of the firm), and private benefits (the right to expropriate the wealth of minority shareholders). Simulation reveals a number of fresh insights including that control and marketability effects interact in a complex way not well described by conventional treatments of them; that control effects dominate marketability effects; that the minority discount grows larger with the range of strategic choices and smaller with the correlation among strategic alternatives. The study simulates the discount for non-marketability and lack of control in the aborted merger of Volvo and Renault and finds estimates consistent with observed values.

Abstract:
Professor C. Roland Christensen, once remarked that the management of beginnings and endings was among the most important, but least appreciated, professional skills. Professors are trained to focus on the substantive middle, the beef, as it were, in the intellectual burger. All too often the buns must fend for themselves. Such neglect can be costly. A faulty start to a course can create a legacy that will haunt the instructor for the rest of the course, or worse. A bad beginning makes a bad ending said Euripides. The reality is that first impressions are hugely important within the classroom. How can one get a course launched well? Several instructors shared ideas with me; their comments addressed a variety of aims and tactics.

Abstract:
Students must evaluate eight projects' cash flows and rank the projects in terms of their economic attractiveness. Students can use all possible criteria [net present value (NPV), internal rate of return (IRR), return on investment (ROI), profitability index, and payback]. This case introduces the valuation and comparison of capital investments. With advanced students, the case can be used to review the effects of unequal project lives and uncertain discount rates. Student and instructor worksheet files are available for use with the case and teaching note.

capital budgeting, capital investment, cash flow, valuation

Abstract:
Students must evaluate eight projects' cash flows and rank the projects in terms of their economic attractiveness. Students can use all possible criteria [net present value (NPV), internal rate of return (IRR), return on investment (ROI), profitability index, and payback]. This case introduces the valuation and comparison of capital investments. With advanced students, the case can be used to review the effects of unequal project lives and uncertain discount rates. Student and instructor worksheet files are available for use with the case and teaching note.

capital budgeting, capital investment, cash flow, valuation

Abstract:
The mission of this book is to help university-level instructors promote more effective professional learning by students through discussions. In 38 brief chapters, the book provides mini-cases for the reader's own reflection, surveys core ideas underpinning discussion leadership, outlines strategies for developing case teaching skills, highlights techniques of shaping the learning experience for students, and lends support for responding to various challenges. Written in a direct and conversational style, the book offers insights for both the novice and experienced case teacher.

Abstract:
In January 1996, the chief financial officer must fashion a response to a raider who claims that a major business segment of the company should be sold because it is not earning a satisfactory rate of return (ROR). The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a risk-adjusted hurdle rate system. The students' tasks are to resolve the debate, estimate weighted-average costs of capital (WACC) for the two business segments, and respond to the raider. Because the case was prepared to serve as part of an introduction to estimating investors' required rates of return, it would best follow one or two class sessions introducing techniques for estimating WACC. Although the numerical calculations required are light, some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb. The case can be used to pursue a variety of teaching objectives, including (1) extending risk return (i.e., mean variance) analysis to corporate finance; (2) surveying classic arguments for and against the use of risk-adjusted hurdle rate systems; (3) assessing the assumptions and limitations of risk-adjusted hurdle rate systems; (4) exercising the estimation of segment WACCs; and (5) considering possible organizational barriers to the implementation of risk-adjusted hurdle rates.

acquisitions, capital budgeting, cost of capital, mergers, performance evaluation, takeovers, valuation, diverse protagonist, gender (female protagonist)

Abstract:
In January 1996, the chief financial officer must fashion a response to a raider who claims that a major business segment of the company should be sold because it is not earning a satisfactory rate of return (ROR). The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a risk-adjusted hurdle rate system. The students' tasks are to resolve the debate, estimate weighted-average costs of capital (WACC) for the two business segments, and respond to the raider. Because the case was prepared to serve as part of an introduction to estimating investors' required rates of return, it would best follow one or two class sessions introducing techniques for estimating WACC. Although the numerical calculations required are light, some of the subtleties about the use of risk-adjusted hurdle rates will require time for the novice to absorb. The case can be used to pursue a variety of teaching objectives, including (1) extending risk return (i.e., mean variance) analysis to corporate finance; (2) surveying classic arguments for and against the use of risk-adjusted hurdle rate systems; (3) assessing the assumptions and limitations of risk-adjusted hurdle rate systems; (4) exercising the estimation of segment WACCs; and (5) considering possible organizational barriers to the implementation of risk-adjusted hurdle rates.

acquisitions, capital budgeting, cost of capital, mergers, performance evaluation, takeovers, valuation, diverse protagonist, gender (female protagonist)

Abstract:
The task for students is to evaluate the 7E7 project against a financial standard, the investors' required returns. The case gives internal rates of return (IRR) for the 7E7 project under base case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing's commercial-aircraft business segment in order to evaluate these IRRs. As a result of this analysis the students identify the "key value drivers" and distinguish, on a qualitative basis, the key gambles Boeing is making. The general objective of this case is to exercise students' skills in estimating a weighted average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and defense business; thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing's overall corporate WACC. In doing so, students engage the concept of value additivity.

capital budgeting, investment analysis, valuation

Abstract:
The task for students is to evaluate the 7E7 project against a financial standard, the investors' required returns. The case gives internal rates of return (IRR) for the 7E7 project under base case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing's commercial-aircraft business segment in order to evaluate these IRRs. As a result of this analysis the students identify the "key value drivers" and distinguish, on a qualitative basis, the key gambles Boeing is making. The general objective of this case is to exercise students' skills in estimating a weighted average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and defense business; thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing's overall corporate WACC. In doing so, students engage the concept of value additivity.

capital budgeting, investment analysis, valuation

Abstract:
CASE HAS A SPREADSHEETIn this case the student is cast into the role of adviser to Anita Roddick, the managing director of The Body Shop. The student must prepare a three-year forecast of the firms income statement and balance sheet. The case is intended to provided a first-time introduction to percentage-of-sales forecasting and walks the student through the preparation of a simplified forecast, first using pencil and paper, then a spreadsheet program on the personal computer. The case emphasizes the importance of being able to talk plainly about ones financial forecast and the insights that are of use to the general manager.

corporate financial strategy, financial analysis, forecasting

Abstract:
In 2002, a money manager is considering how to vote her shares in Hewlett-Packard on the proposal to merge with Compaq. The A case (UVA-F-1450) presents information about the strategic and financial motivations of the merger. Included are completed valuations of both HP and Compaq and detailed summaries of the leading advocate (Carly Fiorina) and critic (Walter Hewlett). The tasks for the student are to value the prospective synergies in the deal and critically assess the strategic arguments (pro and con). The B case affords a detailed examination of the terms of the proposed merger. The tasks for the student are to critically assess the specific design of the deal and its impact on shareholders. Of particular interest are the impact on earnings per share (i.e., EPS dilution), the governance of the new firm, and whether this is, indeed, a merger of equals. The C case (UVA-F-1452) describes the outcome of the proxy contest. The task for the student is to evaluate the strategies of each side in communicating with shareholders and presenting arguments. The objectives of the case module are to expose students to the mechanics of proxy contests, exercise skills in valuation and strategic analysis, and critically evaluate deal terms. The A and B cases can be taught in sequential classes or in one class. The C case is typically distributed at the end, followed by a brief discussion.

mergers and acquisitions, valuation, post merger integration

Abstract:
"He knows not his own strength that hath not met adversity."
-- Ben Jonson


So, boy, don't you turn back.
Don't you set down on the steps
'Cause you finds it kiner hard.
Don't you fall now -
For I'se still goin', honey
I's still climbin';
And life for me ain't been no crystal stair. -- Langston Hughes, Mother to Son


A man invited Nasrudin to go hunting with him, but mounted him on a horse which was too slow. The Mulla said nothing. Soon the hunt outpaced him and was out of sight. It began to rain heavily, and there was no shelter. All the members of the hunt got soaked through. Nasrudin, however, as soon as the rain started, took off all his clothes and folded them. Then he sat down on the pile. As soon as the rain stopped, he dressed himself and went back to his host's house for lunch. Nobody could work out why he was dry. With all the speed of their horses they had not been able to reach shelter on that plain.

"It was the horse you gave me," said Nasrudin.

The next day he was given a fast horse and his host took the slow one. Rain fell again. The horse was so slow that the host got wetter than ever, riding at a snail's pace to his house. Nasrudin carried out the same procedure as before. When he got back to the house he was dry.

"It is your fault!" shouted his host. "You made me ride this terrible horse."

"Perhaps," said Nasrudin, "you did not contribute anything of your own to the problem of keeping dry?" -- Idries Shah, "Dry in the Rain," from The Pleasantries of the Incredible Mulla Nasrudin


"Fear is an instructor of great sagacity, and the herald of all revolutions." -- Ralph Waldo Emerson


The tough teacher is a familiar heavy in film and literature: martinet, boor, hellion, or iceman. Such characterizations are a repugnant self-image to most teachers. Perhaps for this reason the tough teacher seems to be a fading breed on campuses. It is hard to imagine one who is tough and compassionate, student-centered, learning-focused and successful as measured by conventional student ratings. But the quotations of Emerson, Jonson, Hughes, and Shah can feed our imagination in useful ways. To do so is important because how tough one should be is almost the hardest choice about teaching style that an instructor must make. Erring by too much or too little suboptimizes student learning. Then, too, one must choose how to be tough. The limitless combinations of content (how tough to be) and form (how to be tough) enrich the dilemma. Where can the instructor - particularly the novice - find guidance? One could listen to the students, especially their teaching evaluations. But student feedback is an imperfect guide for calibrating one's style. A second approach would be to follow the crowd of one's colleagues. But as examples of grade inflation suggest, following the crowd sometimes results in a race to the bottom. Third, one could imitate an exemplar with whom one studied in the past. But exemplars became that way because of how they responded to their circumstances; what you need is a response to your situation. This month's column argues that a concern for learning outcomes is the best lamp with which to find one's way through these dilemmas. It helps immensely to have a view about toughness in teaching: why and how to be tough. The column offers some reflections.

Abstract:
This note intended as an aid in the evaluation of project-financing proposals. It defines project financing, describes its strengths and weaknesses relative to internal financing, explores how project structures distribute risks and returns, and lays a conceptual foundation for the quantitative analysis of project-financing proposals.

quantitative analysis, financing, Risk and Return

Abstract:
This note intended as an aid in the evaluation of project-financing proposals. It defines project financing, describes its strengths and weaknesses relative to internal financing, explores how project structures distribute risks and returns, and lays a conceptual foundation for the quantitative analysis of project-financing proposals.

quantitative analysis, financing, Risk and Return

Abstract:
This case puts the student in the shoes of the recently appointed treasurer of Polaroid Corporation, who must consider several matters concerning the firm's debt policy. An immediate concern is the company's outstanding $150 million 7.25% notes, due to mature in several months. Although investment bankers interested in doing business with Polaroid have been trying to present proposals for refunding the issue, the new treasurer believes that any refunding decision should be part of a larger review of the firm's financial policies. Accordingly, he has undertaken a review of the firm's overall debt policy, focusing primarily on the mix of debt and equity and on the maturity structure of the debt. The case asks students to consider how much flexibility Polaroid's business will require in future years and to pick a target debt ratio that provides the necessary flexibility. Students must evaluate, in addition to internal demands for funds, the role of bond ratings and investment-grade status in maintaining ongoing access to capital markets.

Equity, debt policy, financial policy, restructuring

Abstract:
This case puts the student in the shoes of the recently appointed treasurer of Polaroid Corporation, who must consider several matters concerning the firm's debt policy. An immediate concern is the company's outstanding $150 million 7.25% notes, due to mature in several months. Although investment bankers interested in doing business with Polaroid have been trying to present proposals for refunding the issue, the new treasurer believes that any refunding decision should be part of a larger review of the firm's financial policies. Accordingly, he has undertaken a review of the firm's overall debt policy, focusing primarily on the mix of debt and equity and on the maturity structure of the debt. The case asks students to consider how much flexibility Polaroid's business will require in future years and to pick a target debt ratio that provides the necessary flexibility. Students must evaluate, in addition to internal demands for funds, the role of bond ratings and investment-grade status in maintaining ongoing access to capital markets.

Equity, debt policy, financial policy, restructuring

Abstract:
This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc. associated with a series of announcements in 2004. These announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. The task for the student is to evaluate the implications of these announcements and assess the financial health of the company. This case is intended to be introductory: it can provide a first exercise in financial statement analysis and lay the foundation for two important financial themes, the concept of financial "health" and the financial-economic definition of "value" and its determinants.

financial reporting and disclosure, financial-statement analysis, economic value added

Abstract:
This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc. associated with a series of announcements in 2004. These announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. The task for the student is to evaluate the implications of these announcements and assess the financial health of the company. This case is intended to be introductory: it can provide a first exercise in financial statement analysis and lay the foundation for two important financial themes, the concept of financial "health" and the financial-economic definition of "value" and its determinants.

financial reporting and disclosure, financial-statement analysis, economic value added

Abstract:
This case may be taught singly or used as a merger-negotiation exercise with "Daimler-Benz A. G.: Negotiations between Daimler and Chrysler" (UVA-F-1241). Set in February 1998, the case places students in the position of negotiators for the company; their task is to value both firms, assess the potential earnings dilution of a combination, and negotiate a detailed agreement with their counterpart. The case can be used to explore such interesting negotiation issues as determination of a share-exchange ratio, treatment of major stockholders, and structuring a deal. Also, the case and exercise can be used to spark a discussion of acquisition in comparison with strategic alliance, or other less formal models of combination.

mergers and acquisitions, strategic alliance, negotiation, valuation, cross-border investment

Abstract:
This case may be taught singly or used as a merger-negotiation exercise with "Daimler-Benz A. G.: Negotiations between Daimler and Chrysler" (UVA-F-1241). Set in February 1998, the case places students in the position of negotiators for the company; their task is to value both firms, assess the potential earnings dilution of a combination, and negotiate a detailed agreement with their counterpart. The case can be used to explore such interesting negotiation issues as determination of a share-exchange ratio, treatment of major stockholders, and structuring a deal. Also, the case and exercise can be used to spark a discussion of acquisition in comparison with strategic alliance, or other less formal models of combination.

mergers and acquisitions, strategic alliance, negotiation, valuation, cross-border investment

Abstract:
This case provides a foundation for student discussion of financial ratios and the insights that may be gained through their use. The case presents textual descriptions of pairs of companies in eight different industries and asks the students to match the text description with the correct financial ratios for each company. Classroom discussion of the students' attempts to match results and companies reveals the strong influence of both industry and corporate strategy on the financial results and ratios for firms. A key lesson is that good financial and ratio analysis requires learning about both an industry's and a company's strategy. The case is also a good vehicle for discussing different financial ratios and their meaning.

corporate strategy, financial analysis, financial ratios, industry analysis

Abstract:
This case provides a foundation for student discussion of financial ratios and the insights that may be gained through their use. The case presents textual descriptions of pairs of companies in eight different industries and asks the students to match the text description with the correct financial ratios for each company. Classroom discussion of the students' attempts to match results and companies reveals the strong influence of both industry and corporate strategy on the financial results and ratios for firms. A key lesson is that good financial and ratio analysis requires learning about both an industry's and a company's strategy. The case is also a good vehicle for discussing different financial ratios and their meaning.

corporate strategy, financial analysis, financial ratios, industry analysis

Abstract:
In January 1993, the senior-management committee of Pan-Europa Foods must decide which major projects to fund for that year. The board of directors has arbitrarily set a limit of ECU80 million for the projects. Various managers, however, have proposed projects totaling ECU208 million. The tasks for the student are to evaluate the completed discounted-cash-flow analyses that the case presents, together with the qualitative factors (mainly strategic considerations and company politics), and choose the projects to be approved. The main conceptual issue the case presents is capital rationing and its impact on corporate-investment behavior. Looking at many projects and the senior-management perspective, the case is a useful complement to other capital-budgeting cases that focus on single projects. An instructor worksheet file is available for use with this case and teaching note.

capital budgeting, cash flow, internal rate of return, intrapersonal behavior, resource allocation, international case, diversity case, strategic planning, international

Abstract:
In January 1993, the senior-management committee of Pan-Europa Foods must decide which major projects to fund for that year. The board of directors has arbitrarily set a limit of ECU80 million for the projects. Various managers, however, have proposed projects totaling ECU208 million. The tasks for the student are to evaluate the completed discounted-cash-flow analyses that the case presents, together with the qualitative factors (mainly strategic considerations and company politics), and choose the projects to be approved. The main conceptual issue the case presents is capital rationing and its impact on corporate-investment behavior. Looking at many projects and the senior-management perspective, the case is a useful complement to other capital-budgeting cases that focus on single projects. An instructor worksheet file is available for use with this case and teaching note.

capital budgeting, cash flow, internal rate of return, intrapersonal behavior, resource allocation, international case, diversity case, strategic planning, international

Abstract:
Empirical Chemicals is a worldwide competitor in its industry, but earnings are falling and investors are anxious for improved financial performance. The plant manager of an aging production facility believes the time is right for plant modernization to make up for deferred maintenance and to increase production efficiency. The task for the student is to choose the relevant cash flows and complete the capital-expenditure analysis. Student and instructor worksheet files are available for use with the case and its teaching note. See also the B case (UVA-F-1021).

capital budgeting, diverse protagonist, female, relevant costs, international case, diversity case, diversity, international

Abstract:
Empirical Chemicals is a worldwide competitor in its industry, but earnings are falling and investors are anxious for improved financial performance. The plant manager of an aging production facility believes the time is right for plant modernization to make up for deferred maintenance and to increase production efficiency. The task for the student is to choose the relevant cash flows and complete the capital-expenditure analysis. Student and instructor worksheet files are available for use with the case and its teaching note. See also the B case (UVA-F-1021).

capital budgeting, diverse protagonist, female, relevant costs, international case, diversity case, diversity, international

Abstract:
This technical note presents an overview of the process by which an analyst could proceed to assess the financial policy of a firm. The note defines several dimensions of financial policy, offers three benchmarks against which to evaluate the policy, and reviews the FRICTO framework with which to assess proposals for future financial policy.

capital structure, financial policy, strategic planning

Abstract:
This technical note presents an overview of the process by which an analyst could proceed to assess the financial policy of a firm. The note defines several dimensions of financial policy, offers three benchmarks against which to evaluate the policy, and reviews the FRICTO framework with which to assess proposals for future financial policy.

capital structure, financial policy, strategic planning

Abstract:
The practice of M&A is vastly influenced by securities laws and regulations. These constraints arise in the issuance of new shares by a buyer, in the disclosure of information to prospective investors, and in the prohibitions on insider trading. While there is wide discretion within these and other settings, the consequences for violating laws and regulations can be very costly, in the form of civil and criminal penalties. Since ignorance of the law is no defense, the M&A practitioner must learn the general structure: this chapter is devoted to providing an introduction to the subject. The field is complicated; its important nuances easily exceed the scope of discussion here. Thus, you must seek expert legal advice.

Key lessons from this chapter include these:

- You must disclose to markets all material and relevant facts about a proposed M&A transaction between two public companies. The aim of securities laws is to inform investors, produce more efficient markets, and achieve a fair or level playing field. Often, there will be sound economic reasons for telling less, rather than more. The disclosure requirements are vague, placing the burden on the practitioner to judge wisely how much to tell. A simple diagnostic will determine whether a fact is material: would you want to know about it if you were in the investor's shoes?

- You must control leakage of information about a deal and avoid insider trading. The aim of securities laws is to prevent market manipulation by insiders.

- You must observe correct procedures regarding deadlines and filings with regulators. These rules of the road limit the practitioner's flexibility in some respects.

Abstract:
The case literature needs constant replenishment. Many of our colleagues contemplate developing new cases, but aren't quite sure how to begin. To them I offer three pieces of advice. In addition, the column summarizes suggestions from five writers and users of case studies.

Abstract:
What superior teachers say about their own success usually sounds banal or inscrutable, hardly the stuff from which novices can take much direction. I think there is a good reason for this, which holds important implications for your own development as a teacher. This column summarizes a provocative article and offers insights into key attributes of superior teachers.