Mercadona. A Global Corporate Finance Case
Posted: 4 Apr 2017 Last revised: 4 Nov 2018
Date Written: April 1, 2017
This case is considered to be the connecting thread to the 35 hour Corporate Finance course for postgraduates and executive education in which: 1) the main concepts of financial statements analysis will be reviewed, including those regarding cost structure, break-even point and operating leverage; 2) projections of cash flows will be performed to assess the capacity to face the service of the debt related to an acquisition; 3) the rating of the company will be calculated based on the forecasted financial ratios and the different financing alternatives will be analysed; 4) hedging strategies will be defined to mitigate interest and exchange risks; 5) the cost of capital will be obtained and the optimal financing mix determined and; 6) the enterprise and the equity value will be calculated both with the Discount Cash Flow and Multiples Valuation techniques. Special attention will be given to the beta (how to obtain it from peer companies and the effect of considering or not the beta debt effect) and the growth rate based on the Reinvestment Rate and the Return on Capital Employed. This case has been constructed to be used as a support for each particular section without the need to study the others (i.e. only financial analysis, or hedging strategies or valuation could be studied independently). The case includes an Excel Workbook with the solutions, which can be used at instructors’ convenience by providing templates to the students with more or less information.
Note: Teaching Note and Excel Workbook available.
Keywords: Corporate Finance, Financial Analysis, Free Cash Flow Forecasting, Financing Debt Facilities, DCF, Multiples, Enterprise Valuation, Perpetual Growth Rate, Beta, WACC, Case
JEL Classification: A2, G1, G2, G3
Suggested Citation: Suggested Citation