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This case examines the career path of Merck's CFO, Judy C. Lewent, as a way of tracing changes over time in Merck's finance function. It describes the adoption of innovative quantitative analytical models, changes in job definitions and in the organization of the financial area, and the evolution of professional relationships between finance and other professionals at Merck. These issues are all examined in the context of changes in the drug business.

Genzyme Corp.'s financing history is unusual compared to most biotech companies. This case presents the sequence of financings employed by Genzyme, along with the product--market and corporate-development strategies adopted by Henri Termeer, Genzyme's CEO. As such, the case permits students to evaluate the sequence of financings as a "program" rather than a series of unrelated deals and to consider them in light of the business strategy.

Spreadsheet Supplement for case 293095

This case presents four exercises designed to introduce students to applications of option pricing and decision-tree analysis to real corporate investment problems. Two of the four problems involve decision trees and two involve option pricing. Students should be familiar with basic option pricing theory (Black-Scholes and/or the Binomial Model) before being assigned these exercises.

The finance director of the Texas High-Speed Rail Corp. (THSRC) is considering modifications to the financing program designed to support the development, construction, and operations of THSRC's planned high-speed rail system. The current plan achieves many objectives, including raising $6.5 billion from private sources, but a few problems remain to be addressed. These include temporary overfunding, unutilized tax losses, and certain important contingencies. Designed to highlight the shortcomings of simple valuation tools in a static analysis when applied to a dynamic project. The class discussion should isolate specific analytical issues, which may then be addressed in subsequent class sessions.

Spreadsheet Supplement for case 293072

Describes the "adjusted present value" (APV) approach to discounted cash flow analysis. Much of the note is devoted to a critical comparison of APV and an approach based on the wrighted average cost of capital (WACC). Argues that APV is usually, if not always, simpler, more accurate, and/or more informative than using the WACC. Designed to be distributed in conjunction with a case on valuation and captial budgeting. Assumes students are familiar with the WACC but not with APV.

Less than a year after completing a leveraged buyout of their own company, the managers of BW/IP International were presented with an attractive acquisition candidate. To buy the target company, however, BW/IP would have to borrow more money and take on more administrative problems at a time when its managers are already very busy. The case asks students to consider how BW/IP can convince its lenders that the acquisition is a good idea. Presents two straightforward valuation exercises. Also permits a careful comparison of the capital allocation processes at a large, low-leveraged, public company, versus a small, highly-leveraged, private company.

Spreadsheet supplement for case 293058.

Kaiser Steel entered Chapter 11 bankruptcy proceedings in early 1987. Nine months later it still faces several difficult obstacles to reorganization, including litigation, environmental liabilities, and pension and medical benefits for retired employees. Students are asked to propose a plan for reorganizing Kaiser, including a business plan, a confirmable allocation of assets and/or new securities, and specific steps to implement their proposals and bring the company out of Chapter 11. Addresses conflicts among claimants to a bankrupt firm and the obstacles and opportunities presented to each claimant by U.S. Chapter 11 bankruptcy rules. May be used with Note on Bankruptcy in the United States.

The CFO of Fleetwood Enterprises is considering whether to recommend a large share repurchase to the board of directors. Fleetwood's core businesses, manufactured housing and recreational vehicles, are very sensitive to business cycles and oil prices. Following Iraq's invasion of Kuwait, Fleetwood's stock price dropped more than 20%, but Fleetwood appears strong enough to both survive a severe downturn and repurchase a large block of shares. Designed to permit a thorough review of basic capital structure, dividend payout, and share repurchase theories, in the context of a large firm facing both a potential crisis and a valuable opportunity.

A group of investors is considering buying the sequel rights for a portfolio of feature films. They need to determine how much to offer to pay and how to structure a contract with one or more major U.S. film studios. The case contains cash flow estimates for all major films released in the United States during 1989. These data are used to generate estimates of the value of sequel rights prior to the first film's release. Designed to introduce students to real options and techniques for valuing them. It clearly illustrates the power of option pricing techniques for certain types of capital budgeting problems. Also illustrates the practical limitations of such techniques.

A wholly-owned subsidiary of Lockheed Corp. has an $11 million expansion underway in South Carolina. The company must decide how best to take advantage of the opportunity to issue tax exempt debt. Specifically, the decision involves choices about the maturity and redemption structure of the proposed issue. Designed to let students isolate interest tax shields and subsidies, and to value these elements of a financing package separately, as part of an "adjusted present value" analysis.

An introduction to, and summary of the laws, rules, and procedures established in the United States for settling the claims of creditors on a bankrupt company. Covers both Chapter 7 liquidations and Chapter 11 reorganizations.

Goodyear is nearing its first major capital commitments for the largest investment project in its history, the All American Pipeline. The pipeline will transport heavy crude oil from California to Texas. It is the centerpiece of a major program by Goodyear to diversify away from its core tire business. Goodyear estimates construction cost at just under $1 billion, while outside observers believe the cost could be twice as high. Students are asked to evaluate the project by analyzing data on the supply and demand for heavy crude oil and the economics of transporting it, and by computing and discounting the cash flows the pipeline can be expected to generate.

Spreadsheet Supplement for case 292040

In 1984, Kaiser's shareholders were asked to approve a complicated leveraged buyout of the company. Students are asked to analyze the proposed transaction and make a recommendation. To do this, they must determine who gets what in the deal, whether and how any value is created, whether the post-buyout firm is solvent and adequately capitalized, and how much the newly issued preferred stock is worth. Examines the bankruptcy of the company and the allegations of fraud that followed the 1984 LBO. May be used with Kaiser Steel Corp.--1987.

Describes Jaguar's product market problems in 1989, and its attractiveness to GM and Ford as an acquisition target. Students are asked to evaluate the suitability of GM and Ford as business partners for Jaguar, and to determine how much each should be willing to pay to acquire part or all of Jaguar. They are also asked to formulate tactics for extracting the highest possible price from each bidder.

Spreadsheet Supplement for case 291034.

Examines Kaiser Steel's initial equity offering in 1950. The first case in a sequence that will trace the history of corporate restructurings that occurred 30 to 40 years later, in the 1980s. Subsequent cases examine foreign competition and labor unrest, hostile takeover attempts and LBOs, and bankruptcy and reorganization. Students are asked to recommend a recapitalization for Kaiser Steel in the context of steel industry competitive dynamics, Kaiser's ownership structure, and the U.S. capital markets in 1950.