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International Paper is evaluating entry into European markets via acquisition of Aussedat-Rey, France's second largest paper company. The student is exposed to both strategic and valuation issues as much of the expected value of the takeover involves long-term position in the fast growing European market. The case also provides an opportunity to understand differences in cross-border takeovers as the bid is contested by a French buyer and opposed by French nationalists, thus raising political issues.

This technical note provides a pedagogical overview of management communication for MBA education

This technical note compares two methods of treating debt usage in discounted-cash-flow valuation of investment projects or companies. The note demonstrates that the approach using weighted average cost of capital (WACC) and the approach using equity residual (ER) yield equivalent results if consistent assumptions are used. General features are illustrated with specific examples, including a spreadsheet.

This note provides a detailed explanation of how to apply the equity residual valuation method when the debt/equity mix is changing. An example is provided that works through levering betas. The note can be used to accompany cases on leveraged buyouts.

This case is a relatively straightforward exercise in valuing a potential acquisition target. The case affords students an opportunity to use both discounted cash flow and multiples in their analyses. In addition, at the instructor's discretion, students can do a simple valuation of an option contract and analyze currency choice in a debt issue. The latter two objectives arise if the case is used as an examination. Case Exhibit 1 poses the relevant questions for student preparation.

This case features an entrepreneur who must decide whether to sell his small distribution company. The case explores several issues for class discussion: (1) valuation of a private company, (2) assessing the entrepreneur's perspective and alternatives, (3) deal structuring (including earnouts), (4) risks and their effect on value, and (5) advice from a banker's perspective.

This note provides an overview of the current state of capital-structure theory. It is well suited to an advanced corporate-finance course, after students have been exposed to the basic theory. One perspective on capital-structure choice is to view it as posing trade-offs among five elements: (1) the tax benefits of financing, (2) the explicit costs of financial distress, (3) the agency costs of debt (including an array of indirect costs linked to financial distress), (4) the agency costs of equity, and (5) the signaling effect of security issuance. The first two elements reflect the "modern, traditional" balancing theory of capital structure. The third and fourth build on agency theory and imperfect information and emphasize the individual incentives of decision makers. The fifth element recognizes that the very act of issuing a security can convey new information to investors when there is imperfect information. While newer theories provide a rich array of insights into aspects of financial policy beyond how much debt the firm should undertake, the downside is that at present there is no overarching synthesis of these theories. As a result, practical application requires careful identification of how these particular theories are relevant to the business, the markets, and the situation at hand.

This technical note outlines the link between shareholder-return requirements and a firm's use of debt. It explores the theoretical arguments concerning how the cost of equity changes with the use of debt and discusses the limitations of each view. It also provides conceptual and practical guidance on the use of "levered" and "unlevered" betas.

This note explores how managers determine the proper amount of debt financing to use to fund a firm's operations. It examines the fundamental differences between debt financing and equity financing and the factors that drive the choice between them. The note is suitable for an introductory MBA course on corporate finance.

This case provides an introductory exercise for estimating the cost of capital (cost of equity, weighted average cost of capital) for a firm contemplating a large increase in debt. Students are asked to compare the debt policy of MCI Communications with that of five other leading telecommunications companies to find MCI's optimal capital structure.

This note describes the links between inflation, exchange rates, and interest rates in an international setting. Students are introduced to the basic ideas, which are illustrated with data from four countries. The note emphasizes the managerial implications of these links and their relevance to forecasting exchange rates. It is useful as both background reading to supplement cases and as part of preparation for a lecture on the topic.

This note links pro forma forecasting of financial statements with project valuation of cash flows. Students are shown the link among income statements, balance sheets, and cash flows. The exercise affords practice in forecasting and project analysis, including effects of inflation, changes in working-capital requirements, and calculation of a discount rate.

This case provides data on coupon bonds. Students are asked to estimate the value of portions of the bond (stripping coupons and principal) and must deal with the fact that the term structure of interest rates is not flat. There is also a description of the general nature of stripping bonds.

A positive net present value (NPV) is a direct estimate of value creation for shareholders and is an operational way of carrying through on the strategy of trying to maximize shareholder wealth. To calculate NPV, however we need to estimate the cash costs and benefits of any decision at hand. In this note we discuss the evaluation of investment proposals.