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Spreadsheet supplement for case UV1057.

This case is designed to present students with the challenges of formulating a discounted-cash-flow (DCF) analysis for a strategically important capital-investment decision. Analytically, the problem is representative of most corporate investment decisions, but it is particularly interesting because of the massive size of the American Centrifuge Project and the potential of the project to significantly affect the stock price. Students must determine the relevant cash flows, paying close attention to the treatment of input costs, selling prices, timing of investment outlays, depreciation, and inflation. An important input is the appropriate cost of uranium, which some students argue should be included at book value, while others argue that market value should be used. Although the primary objective of the case is to focus on the estimation of cash flows, students are provided with a straightforward set of inputs to estimate USEC's weighted average cost of capital. The case is designed for students who are learning, or need a refresher on, DCF analysis. Because of the basic issues covered, the case works well with undergraduate, MBA, and executive-education audiences. The case also affords the opportunity to explore a variety of issues related to capital-investment analysis, including relevant costs, incremental analysis, cost of capital, and sensitivity analysis. The case is an excellent example of the value of a firm as the value of assets in place plus the net present value of future growth opportunities.

In 2006, Merrill Lynch became the lead book runner for a $5 billion convertible bond issue for MoGen, Inc., which was the single-largest convertible bond issuance in history. Merrill Lynch's Equity Derivatives Group needed to convince MoGen's management of the best coupon rate and conversion premium for MoGen and the potential investors in the issue. This pricing decision requires students understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. Valuing the conversion option as a call option requires the estimation of the Black-Scholes model, with the volatility being a particularly challenging input. The case is designed for students who already have a basic knowledge of bond valuation and option-pricing principles and works well with undergraduate, MBA, and executive education audiences. The instructor may choose to teach the case in one class period or two.

Spreadsheet supplement for case UV1054.

Spreadsheet Supplement for UV0519

Spreadsheet for case UV2446

This case asks the student to decide whether Aurora Textile Company can create value by upgrading its spinning machine to produce higher-quality yarn that sells for a higher margin. Cost information allows the student to produce cash-flow projections for both the existing spinning machine and the new machine. The cash flows have many different cost components, including depreciation, the number of days of cotton inventory, and the liability costs associated with returns from retailers. The cost of capital is specified in order to simplify the analysis. The analysis has added complexity, however, owing to the troubled financial condition of both the company and the U.S. textile industry, which is in decline as manufacturers migrate to Asia to benefit from lower manufacturing costs. This begs the question whether management should invest in a declining business or harvest the company by paying out all profits as a dividend to the owners. The case is suitable for students just beginning to learn finance principles, but is also rich enough to use with experienced students and executives. The primary learning points are as follows: • The basics of incremental-cash-flow analysis: identifying the cash flows relevant to a capital-investment decision • The construction of a side-by-side discounted-cash-flow analysis for a replacement decision • How to adapt the NPV decision rule to a troubled or dying industry • The effect of financial distress on the NPV calculation • The importance of sensitivity analysis to a capital-investment decision

Spreadsheet for case UV0741

Student spreadsheet to case UV2530

The cofounder of Compass Records, a small, independent music-recording company, must decide whether to "produce and own" the next album of an up-and-coming folk musician or simply "license" her finished recording. This case presents information sufficient to build cash-flow forecasts for either investment alternative. Discounted cash flow (DCF) analysis reveals that licensing will be the more attractive alternative unless the student assesses the value of the options for follow-on albums included in the "produce-and-own" contract.

The acquisition of Torrington, Inc., from Ingersoll-Rand, Inc., required a strategy that met both the investment and financing objectives of the Timken Company. The case provides an excellent example of the principle that investment and financing decisions can be considered independently. Because of Timken's need to have a sequential financing strategy, the case illustrates the complexities of managing large investment decisions that affect a firm's capital structure. The case is best suited as a firm-valuation exercise in a first-year MBA finance course and is also suitable for executive and undergraduate audiences. Case exhibits are provided in a spreadsheet and the DCF valuation in the teaching note is provided in a spreadsheet for instructor use.

What are the agency costs of management-owner conflicts? In this case, Tyson Foods attempts to acquire WLR Foods. But WLR management and the poultry farmers who own 20% of it actively oppose the takeover. A B case (UV2530) and both student (UV4328) and instructor (UV4333) spreadsheets are available to enhance the learning experience.

What are the agency costs of management-owner conflicts? In this case, Tyson Foods attempts to acquire WLR Foods. But WLR management and the poultry farmers who own 20% of it actively oppose the takeover. A B case (UV2530) and both student (UV4328) and instructor (UV4333) spreadsheets are available to enhance the learning experience.

This case is a sequel to "WLR Foods and Tyson Foods" (UV2529), which presents the attempted acquisition of WLR by Tyson Foods in 1994. Over the ensuing six years, WLR's stock price slides consistently downhill until 2000, when it is trading at a fraction of its 1994 value. When WLR's share price hits $4.59, Pilgrim's Pride Corporation (PPC) views the company as an attractive acquisition. This case asks the student to determine how much of a premium PPC should offer and whether WLR management will resist a takeover in 2000 as it did in 1994. Financial information is provided to allow students to compute both stand-alone and with-synergies valuations. The case is best taught immediately following UVA-F-1465. It is designed to be taught as a firm-valuation exercise in a first-year or second-year MBA finance course. It is also suitable for executive and undergraduate audiences. Student (F-1466 WLR-Pilgrims Pride.xls) and instructor (F-1466 TN.xls) spreadsheets are available.

This case asks students to select and implement a methodology for estimating the damages in a complex lawsuit filed under Chapter 11 of the North American Free Trade Agreement. Students are given market-price information to facilitate an event study to measure damages for the firm. The case works well as an introduction to and example of efficient capital markets.

This case presents a challenging discounted-cash-flow (DCF) problem associated with the valuation consequences of changes made to an earnout agreement. The task of the student is to conduct a DCF analysis to compare the values of the original earnout and the amended earnout. The case is designed to be taught in an introductory course as an application of DCF principles, in particular, the choice of an appropriate discount rate consistent with risk.

Spreadsheet for case UV2427

This note is a brief summary of how credit-rating agencies do their job. It includes historical information on rates and capital spreads. The note serves as useful supplementary reading, for students encounteing, for the first time, bonds in a capital-structure case, a capital-markets case, or a cost-of-capital case. The note is designed for undergraduate and executive audiences.

The proposed sale of Hershey Foods during the summer of 2002 captured headlines and imaginations. Six months after making its decision to explore a potential sale, the board of the Hershey Trust Company was examining two serious offers: a joint bid from Cadbury Schweppes PLC and Nestle S.A. and an independent bid from the Wm. Wrigley Jr. Company. In essence, the board faced both an economic and a governance decision. On the economic side, the board needed to determine the value of Hershey as a stand-alone entity compared with the bids being offered. On the governance side, the board needed to decide whether selling Hershey compromised the board's original mandate from Milton Hershey.

In July 2001, a new CEO joins this small manufacturer of CD-ROMs and DVDs to discover that the firm is in the midst of a financial crisis induced by rapid growth. The CEO asks an analyst for help with five tasks: (1) review historical performance of the firm; (2) forecast financing requirements for the next two years; (3) exercise the forecasting model to identify "key driver" assumptions; (4) estimate Star River's weighted average cost of capital; and (5) analyze a proposed investment in a packaging machine. The analyst must offer insights and recommendations based on the work.