Canada's largest privately owned department store, the T. Eaton Company Ltd., founded in 1869, had recently emerged from bankruptcy protection and was now planning to raise $175 million through an initial public offering (IPO). Investment bankers must determine the appropriate share price and consider the appropriateness of the timing for the issue. The case describes North American retail industry trends and the bankruptcy protection process and provides a detailed discussion of the IPO process and valuation considerations. Detailed comparables are provided for such firms as Federated, Nordstrom's and Dillard. The case provides an opportunity to apply a number of valuation techniques, including discounted cash flow, price-to-earnings multiples and enterprise value-to-EBITDA multiples.
The vice-president and general manager of Mitel's semiconductor division is faced with a rapidly growing market for the company's business communication chips, but has limited capacity at the semiconductor plant. There is little industry capacity to outsource production. He must determine how to pursue the growing market and how to secure additional capacity. Options include modifications to the current facility, construction of a new facility, or the acquisition of a plant from another company.
In 1999, City Center Hospital designed a new computer system to reduce record-keeping time spent by nurses, to allow more time to be spent on patient care. The system had been well received by staff at the hospital, and hospital management wanted to market the new system to other hospitals. Students are required to design an experiment that will evaluate the new system. The City Center Hospital (B) case, 9A99E005, presents actual data collected.
This exercise presents the actual data collected from the hospital's nursing staff (see further information contained in the City Center Hospital (A) case, 9A99E004). Students must use this data to show the value of the new system. (A Microsoft Excel data file is available for use with this case, product 7A99E005.)
Ford Motor Company was concerned that five tug operators, each costing $100,000 annually over three shifts, was too many. Colin Cruji was hired to look into the tug operators and see if Ford could eliminate one or more of the five positions per shift. A supplement to this case is available, titled Ford Motor Company and Cruji Management Consulting (B), case 9A99E014. (A Microsoft Excel data file is available for use with this case, product 7A99E013.)
Ford Motor Company was concerned that five tug operators, each costing $100,000 annually over three shifts, was too many. Colin Cruji was hired to look into the tug operators and see if Ford could eliminate one or more of the five positions per shift. Colin has now collected some data. How should he use the data he has collected to evaluate the position of tug operator? Does the data support the possibility of eliminating a tug operator without affecting the current level of garbage collection? (This is a sequel to Ford Motor Company and Cruji Management Consulting (A), case 9A99E013.)
The founder of English Street has decided to take the company to a group of venture capitalists. English Street is an Internet company that provides multimedia content for teaching English to Hong Kong and China residents. She has developed the idea of English Street into a prototype Web site, and is putting together a prospectus (proposal) for a presentation to obtain funding for full development of her business plan.
The president and chief executive officer of Michigan Auto Products, together with the company's executive committee, must decide whether or not to build inventory to hedge against a possible strike at the end of the existing union contract. He also wants to determine an appropriate strategy for the new contract negotiations to take place with the union over the next six months. (A Microsoft Excel model is available for use with this case, product 7A98E031.)
Jeff Smith, formulation analyst for New England Feed Supply Inc., was evaluating the following week's requirements for three animal feed mixes produced by the Burlington plant. A shortage of one ingredient, meat meal, meant that the company would find it difficult to meet the orders on hand. Smith needed to determine which, if any, of the mixture formulae should be altered, and in what way; alternately, he could elect to buy additional meat meal on the spot market, at a significantly higher price. (A Microsoft Excel model is available for use with this case, product 7A98E034.)
The price of a bond is a function of the promised payments and the market-required rate of return. Because the promised payments are fixed, bond prices change in response to changes in the market-required rate of return. For investors who hold bonds, the issue of how sensitive a bond's price is to changes in the required rate of return is important. There are four measures of bond-price sensitivity that are commonly used: Simple Maturity, Macaulay Duration (effective maturity), Modified Duration, and Convexity. Each of these measures provides a more exact description of how a bond price changes relative to changes in the required rate of return.
A small CPA firm puts in a new performance measurement system, and profits increase by 350% in less than a year. This case illustrates the reasons for improved profitability as well as the sustainability of levels of growth, the opportunities, and the threats that await the company.
A group of Trojan Technologies, Inc. employees grappled with the issue of how to structure the business to interact effectively with its customers and manage the company's dramatic growth. The London, Ontario manufacturer of ultraviolet water disinfecting systems believed that strong customer service was key to its recent and projected growth and had come to the realization that changes would have to be made to continue to achieve both simultaneously. The group hoped to develop a structure to address these issues. The executive vice president was to lead the development and implementation of the new structure. The transition to the new structure was to coincide with the new fiscal year.
This note provides a brief overview of the relationship between the macro behaviour of the economy and the resulting impact on investment returns. It is designed to be used within a course on investments or portfolio management. The note starts by establishing a framework for estimating the long-run expected returns of the two major categories of financial assets - equities and (long-term) bonds - on the basis of the fundamental valuation theorem, which states that value comes from expected future discounted cash flows. The note demonstrates that this theorem implies that the long-run expected real returns on equities depend on the dividend growth rate and the expected average growth rate in dividends, which in turn depends on long-run macroeconomic growth. Expected long-term real returns on bonds depend on the yield to maturity and the long-run inflation rate. The note then goes on to establish the long-run behaviour of four key macroeconomic variables: output, inflation, interest rates, and exchange rates. An overview of how to identify business cycle positions is an important component of this analysis. Also, the analysis focuses on methods for identifying disequilibrium situations for interest rates. Finally, the note concludes by discussing some short-run influences on macroeconomic variables and the key role of monetary policy.
This note provides a brief overview of the relationship between the macro behaviour of the economy and the resulting impact on investment returns. It is designed to be used within a course on investments or portfolio management. The note starts by establishing a framework for estimating the long-run expected returns of the two major categories of financial assets - equities and (long-term) bonds - on the basis of the fundamental valuation theorem, which states that value comes from expected future discounted cash flows. The note demonstrates that this theorem implies that the long-run expected real returns on equities depend on the dividend growth rate and the expected average growth rate in dividends, which in turn depends on long-run macroeconomic growth. Expected long-term real returns on bonds depend on the yield to maturity and the long-run inflation rate. The note then goes on to establish the long-run behaviour of four key macroeconomic variables: output, inflation, interest rates, and exchange rates. An overview of how to identify business cycle positions is an important component of this analysis. Also, the analysis focuses on methods for identifying disequilibrium situations for interest rates. Finally, the note concludes by discussing some short-run influences on macroeconomic variables and the key role of monetary policy.
Nanpo (Holdings) Limited, a Hong Kong-based Chinese food distributor is planning for its initial public offering on the Stock Exchange of Hong Kong. Nanpo was established in 1981 with a mandate to be the sole distributor of poultry, fresh water fish, livestock, and fruit and vegetables produced in Guangdong, the bordering province of mainland China. Throughout the years, Nanpo has built up an admirable market share in many food categories and a distribution channel of 500 wholesalers. Recently, the Ministry of Foreign Trade and Economic Cooperation in the PRC reaffirmed its sole distributor status. The management of Nanpo has developed an aggressive growth plan which includes new food processing facilities and forward integration into retail outlets and restaurant chains. Nanpo has turned to the capital market of Hong Kong to finance its future growth. Nanpo's management has decided to float 25% of the company and has engaged a local merchant bank, Hinson Capital, as its lead underwriter. Three weeks away from the planned IPO, Jack Yang, a director of Nanpo, is once again reviewing the details of pricing.
The president of Central Parking must decide how to grow the company with options including continued consolidation of the parking industry and/or growth through related diversification. Initiates discussion of a successful consolidation strategy.
E Ink is a high-technology start-up attempting to revolutionize print communication through electronic ink displays. The founders and top managers of this two-year-old firm are striving to translate a technological breakthrough into a working prototype, move from prototype to full-scale manufacturing, and maintain market excitement about the company. At the same time, they are dealing with a fundamental organizational concern: How to retain E Ink's creativity, drive, and sense of fun while focusing the company on growth and the demands of a first-product introduction.