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This case provides an introductory exercise for estimating the cost of capital (cost of equity, weighted average cost of capital) for a firm contemplating a large increase in debt. Students are asked to compare the debt policy of MCI Communications with that of five other leading telecommunications companies to find MCI's optimal capital structure.

Spreadsheet for case UV2421

Supplements Ready-to-Eat Breakfast Cereal Industry in 1994 (A).

Supplements Ready-to-Eat Breakfast Cereal Industry in 1994 (A).

Supplements Ready-to-Eat Breakfast Cereal Industry in 1994 (A).

Presents a conceptual framework for thinking about markets characterized by asymmetric information. Presents the standard economic analysis of "the lemons problem," and demonstrates how asymmetric information may lead to market inefficiencies and alter the distribution of surplus. Then discusses the potential to overcome these problems through credible signals of quality, illustrated by the example of education as a signal in labor markets. Concludes by briefly discussing the incentives of firms to screen consumers in order to price discriminate or to target particularly profitable consumer groups.

Describes the exchange rate system adopted at Bretton Woods in 1994.

Examines the decision to go public. BioTransplant is an early stage biotechnology company that must decide how to finance its research and development. The pros and cons of public offerings are analyzed versus alternative financing sources.

Spreadsheet Supplement for case 297095

Spreadsheet Supplement for case 197041

Sensormatic is a leading provider of security systems to the retail industry. The company relies on customer financing as a key component of its strategy. The company's growth strategy and accounting is attacked by short-sellers and the financial press.

Describes how activity-based costing (ABC) should be applied with: 1) budgeted, not historical, expenses and 2) assigning the costs of capacity resources.

Supplements the (A) case.

Presents seven examples (i.e., incidents) of conflict concerning foreign direct investment. The incidents lay the framework for discussion of issues such as the jurisdiction of the WTO and the U.S. position, the Helms-Burton Act of 1996 and its political implications, and campaign contributions from foreign corporations backing U.S. Democrats--and the controversy therein.

Jeff Bezos, the founder and CEO of Amazon.com, an Internet-based bookseller, has created one of the most successful ventures for electronic commerce on the Web. With revenue growing at a pace of 30% per month, Bezos attributes the success of Amazon.com to its value proposition--selectivity, availability, price, and service. Even so, Bezos is faced with new challenges in early 1997--competition from the mainstream bookstores Borders, Inc. and Barnes & Noble.

Provides an update to Microsoft in the People's Republic of China--1993.

The owner of an ice cream company must evaluate the performance of three regional businesses. To do the analysis, students must flex the budget by seasonal temperature; calculate revenue, volume, price, and efficiency variances; analyze the effects of transfer prices; and calculate return-on-investment. In addition, the owner considers how to set strategic boundaries and how to compensate his managers.

The Asian economy, particularly China's, is experiencing explosive growth. China needs capital to fund the growth, and this presents a tremendous opportunity for an investment bank that can penetrate the market. Morgan Stanley establishes a joint venture with the China Construction Bank and three other partners to form China's first investment bank. The case discusses problems associated with establishing joint ventures and penetrating into developing markets.

The European organization of Alden Products, Inc. is contemplating a doubling of unit sales over the next ten years. Their largest plant, located in Holland, was set up 25 years earlier to supply all demands of the EEC countries on the continent. It has since expanded six times. Should it expand again? Should it build a new plant in Southern Europe? Or should it increase subcontracting?

S1 is a fast growing subsidiary of the Samsung Group in South Korea that sells business security products. S1 has implemented a number of marketing initiatives that the company president would like to have evaluated.