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Hemosol is a small biotech company that is under pressure to meet its research and development targets. The company is anticipating the completion of the second phase of testing of one of its products within the next year. Before the company can move on to the next phase of testing, Hemosol must obtain more capital. The company will need to rely on the investment community for funding, however, they have been struggling with developing relationships with investors. Hemosol's president has approached the executive vice-president of the Equicom Group Inc., an investor relations firms, for assistance in putting a strategic plan together to improve the company's performance and reputation.

Mediagrif Interactive Technologies operates vertical business-to-business e-commerce marketplaces. The chief executive officer must decide whether to go forward with a previously delayed initial public offering. He must consider the effect of changing market conditions and how to value the company in order to determine the price range that would be used.

This note focuses on some of the methods used in the valuation of private companies. It looks at the differences between private and public companies for valuation purposes and the importance of making a reliable estimate. Also discussed are discounted cash flows, comparable valuation techniques and the limitations and challenges presented by a private company valuation.

The account manager at the Confederation Bank was contemplating a loan request from Peak Roofing, a wholesale and retail distributor of roofing supplies. The funds would be used to add a new branch to its existing three Montreal sites. This was an opportunity to steal Peak Roofing's business from a competitor, but he knew he had to put together a careful analysis of the risks and opportunities to get the deal approved. To do so, he needed to size-up the business, create projected financial statements and structure a deal for both a term and operating loan.

The chief executive officer of the venture capitalist Portal Investments had to decide whether to invest in eHarvest.com, a company with a vision to become the worldwide Internet portal for production agriculture. To do so, he needed to examine Portal Investment's strategic objectives; eHarvest.com's business model and the challenges and opportunities it faced in carrying it out; and issues related to valuation and deal structuring.

The account manager of the Confederation Bank is being asked to significantly increase a loan to the London Ski Club, a not-for-profit organization (which has taken losses for the previous two years), in order to buy a key piece of equipment. Students will have the opportunity to size up the risks and opportunities presented by the borrower, prepare a projected income statement and balance sheet, assess the risks of lending to a not-for-profit enterprise, and to structure a loan deal.

An entrepreneurial company, Zero-Knowledge Systems, provided privacy solutions for Internet-based applications. Their product permitted users to create multiple digital pseudonyms. The entrepreneur and his two sons were looking to U.S. venture capitalists to fund the company's growth and to acquire some expertise. They must put together a list of criteria to use to choose among potential funders and must assign a value to their company, so they will have an idea what percentage of the company they are willing to give up.

The vice-president of Robarts Research Institute is attempting to put together a financing structure for a biotechnology company, Diabetogen, being spun off by the Institute. He must assess the worth of the company, how the equity should be divided among its stakeholders, and how much of the company must be given up to first-round investors.

Microsoft Excel spreadsheet available for use with this case.

Nancy Featherstone, an account manager with the Royal Bank, was assessing a client request for an expanded operating line of credit. Ashleigh Cosmetics Ltd., a Montreal-based manufacturer and distributor of women's cosmetics, planned to launch a new red lipstick line called Marilyn M. Ashleigh had applied for a $2,000,000 increase in its authorized operating line for a total of $4,500,000. The estimated increase was based partly on anticipated inventory and receivable peak levels for the new product.

The owners of Xantrex Technology Inc. are negotiating an injection of equity capital of $3 million. Students are asked to design a deal which is acceptable to both the venture capitalists and the owners. They must also design an appropriate shareholders' agreement. This case should be used in conjunction with Xantrex Technology Inc., case 9A96B051.

The purpose of this note is to explain the concept of economic value added (EVA) and to show how EVA can be employed as a tool to assess managerial performance and assist in making strategic decisions.

The vice president, finance of a firm notes that although performance of the firm as measured by traditional accounting measures has steadily improved, share price has been decreasing. She attempts to employ the concept of economic value added to get to the bottom of the puzzle.

When two or more parties establish a relationship or structure a deal, one of the key issues that arises is the nature of the agency relationship between them. This technical note explains the concept of agency, outlines some of the typical agency relationships that exist in businesses, the agency problems that can arise between people and organizations and the tools that are employed to address these agency problems.

This note provides the reader with typical clauses to be found in shareholders' agreements along with an explanation of the purpose of each clause.

Two managers attempt to compute the cost of capital for B C Telecom Inc. They discuss hurdle rates, dividend yields, stock issues, and borrowing history.