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Focuses on the valuation of a complex option embedded in a convertible debenture with a negative yield to maturity.

The Yale Investments Office must decide whether to continue to allocate the bulk of the university's endowment to illiquid investments--hedge funds, private equity, real estate, and so forth. Considers the risks and benefits of a different asset allocation strategy. Highlights the choice between different subclasses, e.g., between venture capital and leveraged buyout funds.

A team of private equity investors must value the leveraged buyout of a Yellow Pages business that operated in both the United States and the United Kingdom. In the process, they must wrestle with issues of how to conduct cross-border valuations and how to value a stable cashcow business along with a growth business. The case analyzes the economics and incentives of carried interest and compares different valuation methods--Capital Cash Flow and Free Cash Flow.

Kismet Inc. was a rapidly growing distributor of tools and hobby products that focused on selling lower-priced tools through mobile tool shows. The president and treasurer of the company projected a need for funds to finance the company's rapid expansion. The partners wanted to have all the necessary information for the financial institution's account manager when they presented their financing plans.

The investment manager at Burgundy Asset Management had been given the responsibility to assess the investment opportunity presented by Wescast Industries Inc., a large automotive parts supplier that specializes in the design and manufacture of the exhaust manifold for all types of vehicles. The investment manager knew that his investment team would expect a detailed analysis of Wescast and a recommendation on the investment opportunity. He realized that he must move quickly in order to complete the analysis and prepare a preliminary recommendation for his team at the meeting the next week.

The CFO of this infant nutritional products company must choose among competing financing offers. The interplay of Chinese legal and customs restrictions and venture capitalists' bargaining techniques challenge the CFO to navigate a tricky negotiation and to devise a unique business model given these constraints. The case provides a valuation exercise and highlights some of the difficult questions a discerning venture capitalist might ask, requiring the CFO to justify his overall business model and working capital needs. To obtain executable spreadsheets (courseware), please contact our customer service department at [email protected].

Spreadsheet for case UV2370

Spreadsheet for case UV2427

This case examines the April 2002 decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue's innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $22-$24 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67% first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies--the IPO underpricing phenomenon--and are invited to critically discuss various proposed explanations.

Spreadsheet supplement for case UV2512.

Describes the intricate parts of an early real estate deal from the standpoint of the developer including feasibility analysis, market choice, acquisition of land, project development, design and construction issues, investment returns, and equity financing issues. Thirty-two-year-old Dr. Philipp von Wilmowsky is director of Hungarian operations for ECE Projektmanagement, a German real estate development conglomerate. He has been working for two years on the development of a 30,300 square-meter (m2), 75 million Eurodollar shopping project located in the city of Gyor, Hungary. Allows students to analyze the viability and attractiveness of the project and perform calculations on project returns (including co-investor returns), cost analysis, sensitivity analysis, composition of leasing revenues, and loan structuring.

Describes the acquisition of Nat West by Royal Bank of Scotland. Describes the strategic rationale for the acquisition and the process by which the integration of the two banks was accomplished. The acquisition is remarkable for how successful it was, given the typical high rate of failure of similar acquisitions. Teaching Purpose: To teach about the general lessons of successfully implementing mergers and acquisitions.

The primary purpose of this case is to provide students with an opportunity to practice the implementation of a simple activity-based costing (ABC) system. In doing so, students are asked to review several possible allocation bases and ascertain the best base by which to allocate plant administration costs. In addition, students are expected to calculate and compare traditional volume-based or direct-labor plus direct materials-based overhead allocation results with ABC--and then analyze which allocation method is most appropriate to the situation at Zauner Ornaments. This case also allows students to apply a managerial perspective and utilize the cost allocation results to identify potential pricing and cost management strategies.

This case has three main purposes: 1. To illustrate the importance of understanding cost behaviors in calculating the contribution of the Corvallis Cup youth soccer tournament to decide whether to continue, drop, or expand the tournament. 2. To provide a vehicle for discussing sunk costs, overhead allocation methods, and the impact of misallocation on the income/loss shown for a segment of an organization. 3. To allow students to perform simple breakeven analysis using relevant costs.

Spreadsheet for case UV3860

This note is a brief summary of how credit-rating agencies do their job. It includes historical information on rates and capital spreads. The note serves as useful supplementary reading, for students encounteing, for the first time, bonds in a capital-structure case, a capital-markets case, or a cost-of-capital case. The note is designed for undergraduate and executive audiences.

Spreadsheet Supplement for case 204017

Following her husband's death in 1994, Carol Brewer took over the management of her family's investments. This case describes the decisions Brewer made during this process, including her choice to seek active account management, her selection of an investment firm, and her determination of asset allocation within her portfolio. In 2003, Brewer is reassessing her previous investment choices and considering changes she might need to make in the future in light of her plans to retire in six years and live on the income from her investments.

This case provides the outcome to "The Refinancing of Shanghai General Motors (A)" in which the CFO of General Motors' joint venture in Shanghai, Shanghai General Motors (SGM), wants to refinance almost $900 million of project finance it raised to begin operations. The highest priority is improving the terms of the financing with regard to costs and specific covenants. Several factors complicate the CFO's objective, including the presence of capital controls, the impending entry of China into the World Trade Organization, the joint venture partner's captive finance subsidiary, and the conflicting goals of the joint venture partners. The case illustrates how subsidiary financial decisions must trade off entity-level and parent-level concerns. It also illustrates how multinational financial decision making--including transfer pricing, repatriation, and funding decisions--must be designed to accommodate governance concerns, financial objectives, and the potentially divergent interests of joint venture partners. The framework of the ongoing operational and investment decisions that Shanghai General Motors undertakes in its early growth dmeonstrates the "life cycle" of subsidiary finance. The case also touches on elements of foreign governments' attempts to regulate capital markets, the dynamic between domestic and international banks in competing for lending opportunities to multinational subsidiaries, and how subsidiary management can achieve the most desirable funding terms.

The CFO of General Motors' joint venture in Shanghai, Shanghai General Motors (SGM), wants to refinance almost $900 million of project finance it raised to begin operations. The highest priority is improving the terms of the financing with regard to costs and specific covenants. Several factors complicate the CFO's objective, including the presence of capital controls, the impending entry of China into the World Trade Organization, the joint venture partner's captive finance subsidiary, and the conflicting goals of the joint venture partners. The case illustrates how subsidiary financial decisions must trade off entity-level and parent-level concerns. It also illustrates how multinational financial decision making--including transfer pricing, repatriation, and funding decisions--must be designed to accommodate governance concerns, financial objectives, and the potentially divergent interests of joint venture partners. The framework of the on-going operational and investment decisions that Shanghai General Motors undertakes in its early growth demonstrates the "life cycle" of subsidiary finance. The case also touches on elements of foreign governments' attempts to regulate capital markets, the dynamic between domestic and international banks in competing for lending opportunities to multinational subsidiaries, and how subsidiary management can achieve the most desirable funding terms.