MARK E. HASKINS, University of Virginia - Darden Graduate School of Business Administration
Email: HASKINSM@darden.virginia.edu

A manager is faced with problems in analyzing cash flows for the year. He has completed a projected balance sheet and projected income statement, and wants to construct a projected statement of cash flows for the current year (case timing is very near the end of the year). The case serves as an introduction to the idea of cash flow analysis, and the relationships among balance sheet, income statement, and statement of cash flows. It provides a good opportunity for students to discuss expected changes to cash flow statements resulting from changes in management policies or changes in earnings.

RICHARD BROWNLEE, University of Virginia - Darden Graduate School of Business Administration
Email: brownleer@darden.virginia.edu
LUANN J. LYNCH, University of Virginia - Darden Graduate School of Business Administration
Email: lynchl@darden.virginia.edu

This is a revised version of UVA-C-0736. Mary Jane Bowers has recently moved to Lynchburg, Virginia and plans to open a retail garden store. She compiles financial projections for the initial startup of her business and its first year of operation. This case is designed for use during the introductory module of a financial accounting course and intended to give students exposure to the analysis of business transactions and the preparation of financial statements.

BRANDT R. ALLEN, University of Virginia - Darden Graduate School of Business Administration
Email: allenb@darden.virginia.edu

This case is used to study cost-based decision analysis. It has incremental, variable, semivariable, and sunk costs in a classic cost-price-volume situation, set in a service business.

ROBERT SACK, University of Virginia - Darden Graduate School of Business Administration
Email: sackr@darden.virginia.edu
ANDREW WICKS, University of Virginia - Darden Graduate School of Business Administration
Email: wicksa@darden.virginia.edu
PATRICIA H. WERHANE, University of Virginia - Darden Graduate School of Business Administration
Email: werhanep@darden.virginia.edu
JENNY MEAD, University of Virginia - Darden Graduate School of Business Administration
Email: meade@darden.virginia.edu

2 VERSIONS OF THIS CASE - C-2168MCI TO BE USED IN MCI EXEC ED COURSE ONLY. This case details the rise of hard-disk storage manufacturer MiniScribe in the mid-1980s and the company's demise after executives manipulated the financial information.

MARY MARGARET FRANK, University of Virginia - Darden Graduate School of Business Administration
Email: frankm@darden.virginia.edu

Students analyze an employer and an employee's preferences for nonqualified stock options versus incentive stock options. The employer is Microsoft because it issued large amounts of incentive stock options prior to its initial public offering (IPO), which occurred shortly before the Tax Reform Act of 1986 dramatically changed tax rates.

PAUL J. SIMKO, University of Virginia - Darden Graduate School of Business Administration
Email: simkop@darden.virginia.edu

Lone Star Power was a midsize power-generation and power-distribution company. The company's new chief investment officer must evaluate a number of financial-reporting issues raised by an outside analyst. Those issues relate to (1) revenue recognition, (2) consistency of accounting policies, (3) expense timing, (4) classification of reported line items, (5) supplemental interpretive guidance from management, and (6) interim voluntary disclosures. Using a very simple setting, the case blends issues of financial transparency, financial accounting, SEC reporting requirements, and Reg. FD disclosures.

BRYAN CAMP, Texas Tech University - School of Law
Email: bryan.camp@ttu.edu

Governor Palin's 2006 and 2007 tax returns create several teaching opportunities for basic tax classes. This paper analyzes five substantive issues created by the returns and by a legal opinion letter written by Roger Olsen on some of the issues.

The five issues are: (1) the proper treatment of $17,000 paid to Palin by the state of Alaska as her travel allowance; (2) the proper treatment of $43,000 paid to Palin as a travel allowance for her husband and children; (3) the proper treatment of a $9,000 loss claimed for her husband's racing activity; (4) whether the Palins are subject to the penalties for negligence; and (5) whether Mr. Olsen's letter meets the standards for tax practice in Circular 230.

IGNACIO VELEZ-PAREJA, Universidad Tecnologica de Bolivar
Email: ivelez@unitecnologica.edu.co

Most popular corporate finance textbooks (See Benninga and Sarig, 1997, 2007 Brealey, Myers and Marcus, 1996, Brealey, Myers and Allen, 2006, Brealey and Myers, 2000, 2003 and previous editions, Copeland, Koller and Murrin, 1995 and 2000, Damodaran, 1996, Gallagher and Andrew, 2000, Van Horne, 1998, Weston and Copeland, 1992) and practitioners (see World Bank, 2002) present the Weighted Average Cost of Capital WACC calculation as independent from the Free Cash Flow.

It is a common use that practitioners calculate a WACC a priori and use it independently from the firm value (this is, from FCF). In this teaching note we show that FCF affects WACC and that this interrelationship creates circularity, but it can be solved in a very easy way.

There are two appendixes: one explaining the circularity issue and another one for deriving the proper formulation of the cost of equity.