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It was January and Porsche-the legendary manufacturer of performance sports cars-wished to reevaluate rate strategy. Porsche's management had always been unconcerned about opinions of the equity market, buts its currency hedging strategy was becoming something of a lighting rod for criticism. Although the currency hedging results had been positive, many experts believed that Porsche had simply been "more lucky than good." There was a growing nervousness among analysts that the company was actually speculating on currency movements, and that was not in the best interests of shareholders. Analysts were estimating that more than 40% of earnings were to come from currency hedging. Porsche's President and CEO, Dr. Wendelin Wiedeking, now wished to revisit the company's exposure management strategy.

This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

Two experienced venture capitalists have decided to create a new venture capital fund. They have requested $70 million as a lead order from National Bank Financial Inc. and are looking to raise $110 million in capital to form the fund. However, there were several unresolved issues: a main issue was the strategy for deployment of the fund, as well as type of investment, average size of investment, number of concurrent investments, geographic and industry focus, timing and fund management issues such as staffing and governance structure. The partners must develop the investment strategy in order to prepare the equity fund offer memorandum to present to potential investors.

In November 2002, a California state court required the California Public Employees' Retirement Systems (CalPERS) to publicly report its returns on private-equity investments. This case examines the controversy surrounding the disclosure of private-equity returns mandated by this court decision. It includes discussions of the reaction of general and limited partners and the issues surrounding the sizable amounts of pension money invested in alternative investments. The CalPERS decision dovetailed with efforts by the Association for Investment Management and Research (AIMR) and the British and European Venture Capital Associations to reach greater agreement on disclosure standards in reporting the results of private-equity investments. The case details one set of standards, AIMR's Global Investment Performance Standards (GIPS), which would become effective January 1, 2005. Students are asked to calculate the proposed metrics for a typical fund and assess their usefulness to a prospective investor. More broadly, the case addresses the type of information necessary to properly benchmark private-equity returns and the consequences of this type of disclosure to the industry.

In November 2002, a California state court required the California Public Employees' Retirement Systems (CalPERS) to publicly report its returns on private-equity investments. This case examines the controversy surrounding the disclosure of private-equity returns mandated by this court decision. It includes discussions of the reaction of general and limited partners and the issues surrounding the sizable amounts of pension money invested in alternative investments. The CalPERS decision dovetailed with efforts by the Association for Investment Management and Research (AIMR) and the British and European Venture Capital Associations to reach greater agreement on disclosure standards in reporting the results of private-equity investments. The case details one set of standards, AIMR's Global Investment Performance Standards (GIPS), which would become effective January 1, 2005. Students are asked to calculate the proposed metrics for a typical fund and assess their usefulness to a prospective investor. More broadly, the case addresses the type of information necessary to properly benchmark private-equity returns and the consequences of this type of disclosure to the industry.

This case analyzes the problem of a university looking to reduce its private equity exposure in its endowment. The university hires Cogent Partners, a small investment bank specializing in private equity secondary trading.

Income Trust units are publicly traded equities with unique financial and structural attributes that differentiates them from common shares. Since the mid-1990s, income trusts have experienced substantial growth in popularity among both retail and institutional investors and have become a significant fixture in Canadian capital markets. They provide an option for issuers seeking capital and investors seeking attractive returns during otherwise turbulent market conditions. This note provides a description of how income trusts are structured and priced.

CNS is a small biotech company. The founder of the company is deciding if it's worth applying for phase I approval that will allow the company to continue its research. He must determine the value of the research. Using the traditional DCF valuation method, he is not sure if this captures all of the value of the research and must decide if either the Black-Scholes or binomial model would more accurately determine the value.

This technical note explains the functioning of the venture capital industry in Canada in 2004. Venture capital, is a segment of the invesment community called private equity. Firms in this industry deal primarily with debt and equity investments in private, non-publicly listed companies. The note defines industry terminology and explains the investment process.

This exercise defines balance of payments as a statement of a country's economic transactions with the rest of the world and explains its significance and utility, along with other essential economic terms related to understanding and calculating balance of payments. An exercise for calculating a country's balance of payments accompanies the note.

Spreadsheet to (9-203-005). Download only.

Spreadsheet to (9-204-109). Download only.

Spreadsheet to (9-204-029). Selected case exhibits. Download only.

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Spreadsheet Supplement for case 204055

What do international stocks contribute to the portfolio of a U.S. investor? How do currencies interact with stock price movements in determining the benefits of international diversification? This case helps students compare the risks and returns of foreign stock markets with each other and with the U.S. market and to examine the risks and returns of international diversification. Students must calculate returns, adjust for currencies, derive correlations, and map efficient frontiers based on raw data. To obtain executable spreadsheets (courseware), please contact our customer service department at [email protected].

How should a multinational firm manage foreign exchange exposures? Examines transactional, translational, and competitive exposures. Describes General Motors' corporate hedging policies, its risk management structure, and how accounting rules impact hedging decisions. Although the overall corporate hedging policy provides a consistent approach to the foreign exchange risks that General Motors must manage, there are situations where the company must consider deviations from prescribed policies. Describes three such situations: large exposure to the Canadian dollar with adverse accounting consequences, GM's exposure to the Argentinean currency when devaluation is widely anticipated, and the impact of the depreciation of the Japanese yen to the dollar. To obtain executable spreadsheets (courseware), please contact our Customer Service Department at [email protected]

Each corporate growth project is an option in the sense that managers face choices--push ahead or pull back--along the way. Yet, many companies hesitate to apply options theory to initiatives such as R&D and geographic expansion, partly because these "real" options are highly complex. In this article, the authors make the case that the complexity of real options can be eased through the use of a binomial valuation model. Many of the problems with real-options analysis stem from the use of the Black-Scholes-Merton model, which isn't suited to real options. Binomial models, by contrast, are simpler mathematically, and you can tinker with a binomial model until it closely reflects the project you wish to value. Suppose your company is considering investing in a new plant. To use the binomial model, you must create an "event tree" to figure out the full range of possible values for the plant during the project's lifetime. Then you work backward from the value at completion, factoring in the various investments, to determine the value of the project today. These calculations provide you with numbers for all possible future values of the option at the various points where a decision needs to be made on whether to continue with the project. The authors also address another criticism of real options: that gaps often arise between theoretical and realized values of options of all types. Such gaps may be largely the result of managers exercising options at the wrong time. Looking for trigger points that correspond to the nodes on a binomial decision tree should not only tell managers when they need to decide on exercise, but also specify rules governing the exercise decisions.