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A non-profit organization, partnered with a microfinance organization would send undergraduate students from a business school to teach entrepreneurship in Third World countries: Kenya, India and South Africa. The case requires students to develop fairly straightforward cash budgets and to consider sensitivity analysis based on exchange rate fluctuations. Students are introduced to the concept of micro financing as an effective tool for improving the socio-economic status of entrepreneurs in Third World countries. Students are encouraged to think about relevant issues in gaining sponsorship for a non-profit venture.

Deals with the operational phase of a privately operated urban infrastructure project, Hong Kong's Western Harbour Crossing, a toll road tunnel from West Kowloon to Sai Ying Pun on Hong Kong Island, developed as part of the prestigious Airport Core Program supporting the new Hong Kong Airport development in the early- to mid-1990s. The tunnel opened for business in 1997 and has underperformed financially since then. Explores the hypothetical purchase of the tunnel as an infrastructure portfolio asset by a prominent bank acting for a private equity group. The bank is also interested in providing long-term debt financing on a non-recourse/limited recourse basis to the potential purchasers. Revisits the economics of the project, valuation of the tunnel as a going venture, and financing of the purchase, and discusses the merits of investing in it as a portfolio decision. Considers two corporate/project finance activities. First, as a fundamental capital budgeting function, considers valuation of the Western Harbour Crossing as a going concern relative to its historical cost ("book value") in order to highlight the problems associated with sunk costs and irreversibility in underperforming real fixed assets structured as project-financed ventures. Secondly, outlines the potential purchaser's financing decision and the approach that banks take in syndicating very large financial commitments to very risky projects.

Spreadsheet Supplement for case 207107.

Provides an introduction to the fields of project finance and infrastructure finance, and gives a statistical overview of project-financed investments over the years from 2002 to 2006. Examples of project-financed investments include the $4 billion Chad-Cameroon pipeline, $6 billion Iridium global satellite telecommunications system, $900 million A2 Toll Road in Poland, $1.4 billion Mozal aluminum smelter in Mozambique, and $20 billion Sakhalin II gas field in Russia. Globally, firms financed $328 billion of capital expenditures using project finance in 2006, up from $217 billion in 2001. The use of project finance has grown at a compound rate of 13% over the past 10 years. Focuses primarily on private sector investment in industrial and infrastructure projects, and contains four sections. The first section defines project finance and contrasts it with other well-known financing mechanisms. The second section describes the evolution of project finance from its beginnings in the natural resources industry in the 1970s, to the U.S. power industry in the 1980s, to a much wider range of industry applications and geographic locations in the 1990s, to infrastructure finance in the 2000s. The third section provides a statistical overview of project-financed investment over the last five years (2002 to 2006), and looks at industry, project, and participant specific data. In addition, provides recent data on infrastructure investments and public-private partnerships. The final section discusses current and likely future trends.

The senior portfolio manager at National Securities Inc. (National) is concerned about the recent decline in shares of Agnico-Eagle Mines Ltd (AEM), a Canadian gold producer with several years of precious metals mining experience that was considered one of the portfolio's strongest performers. The senior portfolio manager and his team recently spent time at one of AEM's mines and believed in the operational potential of the company. National's research department had prepared free cash flow forecasts for AEM, which the senior portfolio manager reviewed and modified, following their visit with the company. He knew that despite his team's belief in the future prospects of AEM, the stock may have become overvalued from a fundamental view point. The senior portfolio manager asked his team to perform a fundamental valuation of the equity of AEM. As normally, this meant the team would use the discounted cash flow (DCF) methodology, with financial assumptions that had been carefully examined. However, he knew that DCF valuation would likely undervalue resource companies, such as AEM, as the DCF valuation tended to overlook the flexibility provided at decision nodes during the life of the company with regards to extracting commodities from the ground. As a result, the senior portfolio manager reminded the team that the DCF method, when applied to a mining company, had to be expanded to explicitly include the value of the un-mined metals. The underground un-mined gold would need to be valued as a real option, using an adjusted Black-Scholes model.

KTM is a small motorcycle manufacturing company located in Austria. As a result of difficult economic conditions in 1999, KTM went private with the help of the venture capital firm BC European Capital (BC). Following a couple of years of strong growth, BC is looking to liquidate its position and move on. KTM is faced with the decision of determining the best means to repurchase BC's equity position in the firm and leave the firm with enough financial flexibility to continue to pursue its rapid expansion plans.

Clearwater Seafoods (Clearwater) is a seafood company located on the east coast of Canada. It is an income trust with operations around the world. As a result of the increasing value of the Canadian dollar relative to other currencies around the world, Clearwater has recently ceased paying its distributions. The case considers the decision faced by the chief financial officer to determine the strategy the firm should take to enable it to reinstate its distributions. This involves the choice between different financial and operational means to hedge the foreign exchange risk which brought the firm into its current situation.

Lone Star Power was a midsize power-generation and power-distribution company. The company's new chief investment officer must evaluate a number of financial-reporting issues raised by an outside analyst. Those issues relate to (1) revenue recognition, (2) consistency of accounting policies, (3) expense timing, (4) classification of reported line items, (5) supplemental interpretive guidance from management, and (6) interim voluntary disclosures. Using a very simple setting, the case blends issues of financial transparency, financial accounting, SEC reporting requirements, and Reg. FD disclosures.

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.

Spreadsheet Supplement for case 207113

The Sulzberger family owns 20% of the New York Times Co. (NYT) but controls 70% of the board through a dual-class share structure. At the company's April 2006 annual shareholder meeting, Morgan Stanley Investment Management (MSIM) and other investors, holding 28% of the company's stock altogether, withheld their votes for the 30% of directors that they could vote on as a sign of protest against the management of Arthur Sulzberger, Jr. and the dual-class structure that protects him. MSIM later submitted a proposal urging the NYT to subject the dual-class structure to a vote. In evaluating the proposal, Sulzberger feels torn by his responsibilities to three different constituencies: his readers, his family, and all other NYT shareholders.     

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.

A young entrepreneur with a family background in the Thai restaurant business examines whether to open his own Thai food restaurant. Students are asked to assess his capabilities as a restaurant manager/owner. Students must perform a qualitative size-up of the market and examine whether the chosen location is a good fit. A seating plan is to be designed. Students are to project an income statement and balance sheet and to determine the impact on financial statements if sales increase or decrease 20 per cent from the original forecast. Based on their analysis, students are asked to determine if the restaurant should be opened.

Taka Haneda, a proprietary trader at the Tokyo office of Goldman Sachs, has just learned that the Nikkei 225 will undergo a significant redefinition over the coming week. He faces several billion dollars of customer orders, as well as the opportunity to commit the firm's capital to provide liquidity for the event. He must decide what positions to establish, and at what price he is willing to get out.

PRG-Schultz will run out of cash within a couple of months unless the new CEO can reduce costs and restructure the company's debt. PRG was the dominant market leader in the audit recovery industry. The industry consisted of firms which employed accounting professionals to audit purchasing transactions to discover and collect funds owed to their clients. PRG had historically been profitable, and clients were satisfied with their service. In recent years, however, the industry overall and PRG's sales, had been in decline. This left PRG with a cost base that was no longer sustainable. The CEO must decide where to cut costs and how to convince creditors to give the company the time it needs to turn around. A bankruptcy reorganization is one option open to the company. Describes the audit recovery industry, the company's history, the CEO, the financial problems the company faced, and the first steps taken by the CEO to save the company.

A vice-president of Ventures West, a leading Canadian venture capital firm, must decide what due diligence to conduct in order to recommend an investment in AudienceView, a company that provides software and services for the sports and entertainment ticketing markets. While the case is focused on due diligence, there is sufficient information to allow for a full venture capital investment analysis, including valuation and deal terms.

This is a short case (2 pages), which can be distributed and discussed in class as an update through 2006 of the Nike case series. It follows Nike, Inc.: Entering the Millennium (Case #299-084).

Spreadsheet Supplement for case 207105