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In August 1995, Netscape's board of directors was confronted with a decision about what price to offer the company's shares in its initial public offering (IPO). Preliminary demand for shares was high, but the company had not generated any positive earnings at the time of the offering.

Once the rage of Western capitalism, leveraged buyouts have lost their glamour and much of their respectability. Suggest an LBO as a healthy way to create value, and most people will assume you are just trying to stimulate lively conversation. Propose it as a means of improving operating performance by restoring strong, constructive relationships among owners, managers, and other corporate stakeholders, and you may be viewed as a refugee of the 1980s, deluded by the decade of greed. Although some LBOs may have deserved the criticism they have received, the overall perception about them is distorted, the authors contend. Their research at one LBO firm, Clayton, Dubilier & Rice (CD&R), reveals an approach to ownership and governance that challenges the dominant view. Instead of finding impersonal transactions in which buyers put a lid on investment, growth, and managerial autonomy, the authors found that chief executives had more freedom to exercise discretion under LBO ownership than they had had under corporate ownership. CD&R's experience over more than a decade offers insights into what constitutes best practice in the ownership and governance of corporate enterprises.

A prolonged decline in copper prices prompts Phelps Dodge, one of the world's largest independent copper companies, to consider corporate diversification as a means of protecting itself from copper price volatility.

Spreadsheet Supplement for case 295141.

Provides an elementary introduction to three major classes of derivative instruments: options, forwards and futures, and swaps.

A closed-end mutual fund's decision to study option trading provides an opportunity to study the profit profile and pricing of multiple option investment strategies (e.g., buy a call, buy a put, write a call, buy stock-write call, etc.). This case is designed to provide students with an introduction to option pricing.

Provides a review of valuation techniques used to assess cross-border investments. Discusses the discounting of free cash flows with a weighted average cost of capital and the use of adjusted present value. Special concerns such as foreign-exchange risk, country risks, and international diversification are also discussed. Unlike Note on Cross-Border Valuation, this note contains no discussion of valuing real options. A rewritten version of an earlier note.

Spreadsheet Supplement for case 295096

Spreadsheet Supplement for case 295100

The restructuring of Tiffany's retailing agreement with Mitsukoshi Ltd. in 1993 exposed Tiffany to substantial yen/dollar exchange rate volatility that it had not previously faced. This new exposure requires Tiffany to establish risk management policies and practices. Management must determine whether to hedge, what the objective of hedging ought to be, how much exposure to cover, and what instruments to use. Teaching Objective: To introduce students to the problems of risk management in a relatively uncomplicated administrative situation.

A shift from seasonal to level production of toys will change the seasonal cycle of Toy World's working capital needs and necessitate new bank credit arrangements. A rewritten version of an earlier case.

A comprehensive review case that entails both investment and financing decisions. Students must value an acquisitions opportunity and determine how Nelson Paper ought to finance both the acquisition and its regular capital expenditures program.

The newly privatized Chilean telephone company, Compania de Telefonos de Chile (CTC) must raise substantial new funds externally in order to finance its expansion program. This task is complicated by Chile's small, illiquid capital markets and the skeptical view of Latin American borrowers held by investors outside of the region. CTC's chief financial officer must determine if listing American Depository Receipts (ADRs) on the New York Stock Exchange is a viable financing option for the company.

Spreadsheet Supplement for case 293015

After an LBO and near bankruptcy in the early 1980s, Harley-Davidson makes an astonishing recovery, going public in 1986. Its listing on the New York Stock Exchange in 1987 provides the occasion of an equity analyst to publish a research report in which she must issue a buy, sell, or hold recommendation for Harley's stock. Complicating her analysis is the fact that Harley still faces vigorous Japanese competition and, therefore, has a significant operating exposure to the yen/dollar exchange rate. Stimulates discussion about operating exposure to real exchange rate changes.

Provides a fundamental technical review of valuation techniques used to assess cross-border investments. Discusses the discounting of free cash flows with a weighted average cost of capital, the use of adjusted present value, and the importance of considering real options. Special concerns such as foreign-exchange risk, country risks, and so forth are also discussed.

Provides descriptive background about the development of an international market for currency swaps and, by means of a detailed example, instructs readers in the determination of swap flows and all-in costs of financing using market swap rates. A rewritten version of an earlier note.

Spreadsheet Supplement for case 292043

Describes and compares the corporate governance systems commonly found in the United States, Japan, and Germany.

Spreadsheet supplement for case 292012.