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Two managers attending a week-long executive education course are working on an assignment which requires them to estimate the cost of capital for EnCana Corporation, a leading North American oil and gas producer. The two managers disagree about which costs need to be taken into account to complete the assignment. They are not sure about the costs of different sources of capital, the overall cost of capital and the appropriate use of the hurdle rate.

Two MTR Corporation (MTRC) managers are participating in a week-long program in financial management. For their next class, they need to calculate the cost of capital for MTRC. First, they will review the concepts of investor expectations and cost of capital. Then, they must calculate the cost of capital by using the financial statements provided to them by the instructor. The two managers discuss their understanding of these concepts as they prepare their assignment, which is due in two hours.

Two managers attending a week-long executive education course are working on an assignment which requires them to estimate the cost of capital for EnCana Corporation, a leading North American oil and gas producer. The two managers disagree about which costs need to be taken into account to complete the assignment. They are not sure about the costs of different sources of capital, the overall cost of capital and the appropriate use of the hurdle rate.

Two MTR Corporation (MTRC) managers are participating in a week-long program in financial management. For their next class, they need to calculate the cost of capital for MTRC. First, they will review the concepts of investor expectations and cost of capital. Then, they must calculate the cost of capital by using the financial statements provided to them by the instructor. The two managers discuss their understanding of these concepts as they prepare their assignment, which is due in two hours.

The chief financial officer (CFO) of TELUS Corporation (Telus) has just been informed that Moody's, a bond rating service, has downgraded the firm's credit rating to one notch below investment grade. The CFO's challenge is to determine what specific actions, if any, to recommend to the firm's audit committee. First, this case facilitates a discussion on how changes in capital structure impact a firm's earnings, stock price and flexibility to carry out plan. Second, students learn about how bond ratings are set and how a firm's bond rating affects its bond yield. Last, by focusing on the situation faced by Telus during challenging market conditions in 2002, students learn how to manage relationships with investors while in the midst of change.

Cash Technology Limited is a Xiamen-based manufacturer of self-service banking machines, touchscreens and related software. The company was set to issue its initial public offering on the Singapore Exchange. The proceeds from the IPO would help the mid-sized, entrepreneurial and private company secure its position in the burgeoning Chinese market for automated teller machines and related equipment. With six weeks left before the IPO, the chief executive officer and chief financial officer attempted to value their company by various methods and assess the reasonableness of the offering price proposed by the IPO manager. The case challenges students to examine the attractiveness and value of a business from the perspective of the issuer and potential investors, and can also provide the opportunity for students to develop a strategy for communicating with institutional investors.

Cash Technology Limited is a Xiamen-based manufacturer of self-service banking machines, touchscreens and related software. The company was set to issue its initial public offering on the Singapore Exchange. The proceeds from the IPO would help the mid-sized, entrepreneurial and private company secure its position in the burgeoning Chinese market for automated teller machines and related equipment. With six weeks left before the IPO, the chief executive officer and chief financial officer attempted to value their company by various methods and assess the reasonableness of the offering price proposed by the IPO manager. The case challenges students to examine the attractiveness and value of a business from the perspective of the issuer and potential investors, and can also provide the opportunity for students to develop a strategy for communicating with institutional investors.

Royal Manufacturing Inc. requires an extension of its temporary $3 million line of credit. Holdbacks on contracts and several years of losses were causing a cash flow problem. The company and the bank must now assess the company's financial needs.

Far Eastern Textile, a major Taiwanese textile and telecommunications company, is considering its options for raising US$130 million in a new round of global fund raising. The options of a new common stock or long term debt issue are explored but specific attention is paid to an option raised by the company's investment banker. This option entails the issuance of an innovative convertible debt instrument which combines a zero coupon and a significant conversion premium over the current price of the company's common stock. The benefit and costs of a delayed equity instrument for both corporations and investors is examined, as well as issues regarding security pricing in different financial markets.

PepsiCo Inc. spanned more than 190 countries and accounted for approximately one-quarter of the world's soft drinks. The vice-president of finance for PepsiCo East Asia had been collecting data on the firm's proposed equity joint venture in Changchun, People's Republic of China (PRC). While PepsiCo was already involved in seven joint ventures in the PRC, this proposal would be one of the first two green-field equity joint ventures with PepsiCo control over both the board and day-to-day management. Every investment project at PepsiCo had to go through a systematic evaluation process that involved using capital budgeting tools such as new present value (NPV) and internal rate of return (IRR). He needed to decide if the proposed Changchun joint venture would meet PepsiCo's required return on investment. He was also concerned what the local partners would think of the project. The final decision would be made after a presentation to the president of PepsiCo Asia-Pacific.

<p style="color: rgb(197, 183, 131);"><strong> AWARD WINNER - Regional Asia-Pacific Case Writing Competition</strong></p><br>The Internet investment craze was starting to catch on in Hong Kong. Tom.com Limited, a Hong Kong based Internet company, was planning an initial public offering at the Hong Kong Stock Exchange. A portfolio manager for EuroGlobal Funds was to provide his professional opinion on the value of this investment and its appropriateness for different investors. He was aware of the difficulties in valuing Internet companies and the debate over the choice of valuation methods. Among these, one approach was to analyze the implied hyper-growth rate that Internet companies had to achieve in the next five years in order to justify their current valuations. He decided to apply this approach to Tom.com. Students will have the opportunity to discuss the different valuation methods and the development of Internet and e-commerce companies, especially topics such as business models and expected growth.

The Internet investment craze was starting to catch on in Hong Kong. Tom.com Ltd., a Hong Kong-based Internet company, was planning an initial public offering at the Hong Kong Stock Exchange. A portfolio manager for EuroGlobal Funds was to provide his professional opinion on the value of this investment and its appropriateness for different investors. He was aware of the difficulties in valuing Internet companies and the debate over the choice of valuation methods. Among these, one approach was to analyze the implied hyper-growth rate that Internet companies had to achieve in the next five years to justify their current valuations. He decided to apply this approach to Tom.com.

Pepsico, Inc. spanned more than 190 countries and accounted for approximately one-quarter of the world's soft drinks. The vice president of finance for Pepsico East Asia had been collecting data on the firm's proposed equity joint venture in Changchun, People's Republic of China (PRC). Although Pepsico was already involved in seven joint ventures in the PRC, this proposal would be one of the first two green-field equity joint ventures with Pepsico control over both the board and day-to-day management. Every investment project at Pepsico had to go through a systematic evaluation process that involved using capital budgeting tools, such as new present value and internal rate of return. The vice president of finance needed to decide whether the proposed Changchun joint venture would meet Pepsico's required return on investment. He was also concerned what the local partners would think of the project. The final decision would be made after a presentation to the president of Pepsico Asia-Pacific.

Hutchison Whampoa was considering strategies for its long-term capital structure. The HK$35 billion Hong Kong-based conglomerate had ambitious growth plans in multiple business sectors in different geographies. Traditionally, like many of its domestic peers, Hutchison had relied entirely on short to medium-term bank loans. Its demand for long-term financing, attractive rates in other capital markets (especially the U.S.) and concern about a more diversified investor base had led Hutchison to explore other financing options. In particular, the company was debating the benefits of a Yankee Bond Offering. At the time, Hutchison had already approached Moody's and Standard & Poor's for a bond rating.

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.

Nanpo (Holdings) Ltd., 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. In 1993, the Ministry of Foreign Trade and Economic Cooperation in the People's Republic of China 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.

Two managers attending a financial management course are attempting to compute the cost of capital for Sun Hung Kai Properties Limited, a well-known local Hong Kong firm. The two managers are somewhat 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.

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.

An account manager of a large bank is reviewing a request for term financing to assist with the repurchase of a minority interest in a large trucking company. The firm is considering a term loan as well as an investment by the venture capital arm of the bank. An equity investment would require agreement on the form of the investment and the price to be paid for any stock issued.