A retiring professor must establish a comprehensive financial plan that enables him and his wife to achieve their target lifestyle. In preparing this plan, they devise a budget and a travel agenda and then determine whether they can achieve these outlays and, if so, what risks are involved and how they might manage these risks. They must consider the optimal mix of debt and equity, domestic and foreign currencies, and short- and long-term debt issues.
The chief executive officer of a financial institution must decide whether or not to grant a $3 million loan to an investor in mutual funds. The financial institution makes loans of $2 for every $1 invested in mutual funds to qualified investors. The issue here is to determine whether the risks associated with this loan application justify the investment. The case involves assessing the various risks associated with the loan, including the credit risk attached to the borrower, the market risk of the planned investment program, and the currency risk of a loan in Canadian dollars and investments in foreign securities.
The Good Night Motel is considering offering special pricing for a two-day church convention event involving 20 rooms. This requires the owner to perform contribution analysis, sensitivity analysis, and some qualitative analysis.
The vice-president of operations must submit a valuation and recommendation to expand his plant to handle a doubling of sales over the next three years. Students will have to understand the process review for capital allocation in this large corporation in order to make their recommendation, as well as complete a discounted cash flow.
The owner of a lumber and building supply business is interested in finding out how much the business is worth and how to go about selling it. The business is currently enjoying considerable success and earnings are at record levels. She must decide which valuation method to choose.
The senior officers of a national office supplies manufacturer and distributor are at odds over a slow paying, and perhaps insolvent, major distributor, and what the options are to collect the account and maintain sales in the region.
Two managers attending an executive education course attempt to develop a cost of capital estimate for a leading telecommunications company. The two managers are confused about the costs of various sources of capital, the calculation of the overall corporate cost of capital, and the appropriate use of the hurdle rate. They must investigate the concept of cost of capital, review historical data on risk premiums, develop a process for estimating the various components of the cost of capital, and determine the corporate cost of capital.
The president of a new hotel venture faces a financing decision. The choices include: mortgage debt, common stock, or preferred and common stock. The president has to balance the impact of the financing alternatives on the viability of the venture, her investment returns, the investment returns of prospective outside investors and the financial and business risks.
The president of Pathway Communications Inc. (Pathway), a regional Internet service provider (ISP), had to decide the best course of action to transform Pathway into a national information technology firm that offered end-to-end technology support for a variety of consumer and business needs. At the same time, a regional telecommunications firm wanted to buy Pathway. He wondered if he should pursue this offer or one of the following options: franchise his concept and replicate the Pathway business model; execute a national roll-up by buying several smaller ISPs and then completing an initial public offering; or, combine his business with a larger ISP or other telecommunications firm. This comprehensive strategy case provides students with the opportunity to explore the issues of growth in a young, high-technology firm and to discuss the significant financial implications of the different alternatives.
The senior officers of a national office supplies manufacturer and distributor are at odds over a slow payment, and perhaps insolvent, major distributor, and what the options are to collect the account and maintain sales in the region.
The president of a software development company was contemplating how to reward its investors. Since the company's inception 10 years previously, the company had not paid full dividends to shareholders. The president was anxious to provide some return for the investments made, but he was convinced that he could maximize shareholder return if he could position the company to take advantage of the tremendous industry growth. He also wonders how much capital he will need, and where to obtain it.
The vice president of finance at Rocky Mountain High Ski Resort Inc. (RMH) was examining the alternatives for financing a proposed $25 million expansion. The well-known Western Canadian all-season resort planned to add several new runs, additional snowmaking capacity, another high-speed quad chair lift, a 700-seat restaurant, a new retail ski equipment store, and upgrades to the existing infrastructure. The directors of RMH were scheduled to meet in two weeks to approve both the proposed expansion and financing plans.
An entrepreneur who is anxious to start a business manufacturing a pasta server requires funds to finance the acquisition of equipment and working capital. A venture capital investor demands a cash budget for the first year of business as well as projected financial statements.
Second Cup, the largest chain of specialty coffee stores in Canada, wants to raise money through an initial public offering in order to pay off the company's long-term debt and take advantage of growth opportunities. Nesbitt Thomson, the investment dealer working on the initial public offering, must decide what the company is worth and how many shares to issue in order to raise $14 million.
The owner of a lumber and building supply business is interested in finding out how much the business is worth and how to go about selling it. The business is currently enjoying considerable success and earnings are at record levels. She must decide which valuation method to choose.
A manufacturer is considering mechanizing a highly labour-intensive system. He has received proposals with the related cost savings from two different manufacturers for different parts of the process. The president must analyze the information and determine whether the various proposals are financially feasible.