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An analyst is about to make a presentation on the potential of Superior Industries International as an acquisition target. The issue for students is whether the synergies are enough to justify a 20% premium over the current price. A secondary objective of the case is to introduce the residual cash flow approach and to relate it to the weighted-average cost of capital (WACC) approach.

This note explores the interaction between the use of debt and firm value and provides a brief perspective on the use of debt. It also introduces the notions of financial and operating leverage. In addition, it covers the impact of the use of debt in the presence of no taxes, corporate taxes only, and both personal and corporate taxes.

Students must estimate the selling price of Colt stock on the day following the announcement of a drastic financial restructuring, estimating the value of the debt's tax shield. Colt stock has been selling for $66.75 per share, and Colt has just announced a plan calling for shareholders to receive $85 and one new share of stock in the recapitalized Colt for each share of existing stock held. The cash payout is to be financed by issuing $1.5 billion of new debt.

This note is designed to introduce the binomial option-pricing model. It covers the basic concepts using a one-period model and then provides an example of a two-period model. The note focuses on a conceptual approach to binomial option pricing rather than formulas.

This technical note discusses the three types of foreign exchange risk: transaction exposure, translation exposure, and economic exposure. It addresses the nature of those risks and presents some methods that companies might use to manage them. Included in this note are discussions of the financial accounting and reporting requirements of FAS No. 52 (Foreign Currency Translation), of foreign exchange markets, of hedging strategies, and of such activities as loan swaps and licensing agreements.