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Presents a valuation problem in a fictitious firm, Digital Everywhere. Students have the opportunity to compare various discounted cash flow valuation models in an entrepreneurial firm.

Presents recommendations for hurdle rates of Marriott's divisions to select by discounting appropriate cash flows by the appropriate hurdle rate for each division.

This case serves as a foundation for student discussion of the estimation of required rates of return (ROR) on investments in emerging markets. An associate in J.P. Morgan's Latin America M&A department (mergers and acquisitions) is assigned the task of valuing the telephone directory operations ("paginas amarelas" means "yellow pages") of a large Brazilian conglomerate. All cash flows have been converted to U.S. dollars, and present values computed for various discount rates. The remaining step is to determine the appropriate target rate of returns for dollar flows originating in Argentina, Brazil, and Chile. The capital asset pricing model (CAPM) is used along with a political risk premium and country beta. The necessary figure work is comparatively light, leaving the student time to reflect on the need for various adjustments in estimating cross border rates of return.

Service Corp. International, the world's largest funeral consolidator, has just made a formal takeover bid for The Loewen Group, its key competitor. The offer is approximately 50% above the price at which The Loewen Group stock traded 30 days ago. Should The Loewen Group fight the takeover, or should it accept it? This case helps students understand how to evaluate a company's strategy relative to its external environment and internal capabilities.

It is early October 1994, and Huaneng Power International (HPI), an independent power producer in the People's Republic of China (PRC), is in the process of executing a global equity issue to raise funds for the construction of new power plants. The company is planning to list the new shares through an American Depositary Receipt program on the New York Stock Exchange. The company has recently reduced the price of the issue due to poor market conditions and investor resistance to the price range stated in the preliminary prospectus. The student must decide, as HPI management, whether the new offer price and choice of listing exchange is reasonable in light of recent market events and the political, economic, social, and technological environment in the PRC.

Discusses the start-up strategy at Genset, a French biotech firm. Pascal Brandys, a venture capitalist, and Marc Vasseur, a leading French scientist, must decide how to proceed. Future real options are central to the strategy.

The case provides the facts and figures for the complete financial evaluation of the construction and operation of an automobile manufacturing plant for the new GM Macaw in Brazil. Although the Macaw is to truly be produced by GM in Brazil, the financial and economic values used in the case are fictionalized. The challenge for GM is to evaluate the pro forma financial analysis as to whether the project is a viable investment for GM from both the subsidiary and the parent's viewpoint.

Spreadsheet supplement for TB0201.

As of early 1998, virtually all U.S. states had adopted legislation permitting the organization of limited liability companies. This note describes this new type of entity and the reason why it has become so popular.

Discusses the efforts of three Israeli software engineers' efforts to bring a network security software product to market. The firm needs an investment to complete programming and start marketing.

Discusses various valuation methodologies for analyzing entrepreneurial firms. Gives a description of the methodologies and describes when each method is appropriate.

Discusses the economics of the private equity market and recent efforts by the U.S. Small Business Administration to promote greater angel financing.

Spreadsheet Supplement for case 298071

Spreadsheet Supplement for case 298082

This note provides an overview of the current state of capital-structure theory. It is well suited to an advanced corporate-finance course, after students have been exposed to the basic theory. One perspective on capital-structure choice is to view it as posing trade-offs among five elements: (1) the tax benefits of financing, (2) the explicit costs of financial distress, (3) the agency costs of debt (including an array of indirect costs linked to financial distress), (4) the agency costs of equity, and (5) the signaling effect of security issuance. The first two elements reflect the "modern, traditional" balancing theory of capital structure. The third and fourth build on agency theory and imperfect information and emphasize the individual incentives of decision makers. The fifth element recognizes that the very act of issuing a security can convey new information to investors when there is imperfect information. While newer theories provide a rich array of insights into aspects of financial policy beyond how much debt the firm should undertake, the downside is that at present there is no overarching synthesis of these theories. As a result, practical application requires careful identification of how these particular theories are relevant to the business, the markets, and the situation at hand.

This case focuses on analyzing financial statement data for seven large companies in the pharmaceutical industry. The data was obtained from COMPUSTAT PC Plus. The seven firms are all listed on the New York Stock Exchange (NYSE). The firms (ticker symbols) are American Home Products Corp. (AHP), Bristol-Myers Squibb Co. (BMY), Eli Lilly & Co. (LLY), Merck & Co., Inc. (MRK), Pfizer Inc. (PFE), Pharmacia & Upjohn Inc. (PNU) and SmithKline Beecham PLC (SBH). The seven companies are all headquartered in the U.S., except SmithKline Beecham which is headquartered in the U.K. All are involved in the development, production and distribution of prescription pharmaceutical drugs.

Thousands of companies every year acquire other companies, or are acquired themselves. This event is usually painful and messy--and statistics show, it is frequently unsuccessful as well. Nearly half of all mergers fail. One company that has made a fine art of the acquisition integration process, however, is GE Capital, which has integrated hundreds of companies in the past decade. Consultants Ron Ashkenas and Suzanne Francis, and Lawrence DeMonaco of GE Capital, offer four lessons from the company's successful run.

Venture capital is a segment of the private equity category that encompasses investments in young, rapidly growing companies with the potential to develop into significant economic contributors. Provides a comprehensive yet straightforward description of the entire private equity industry, including its definition, expected returns, the investing process, and the structure of private equity firms. Concludes with an overview of the industry in 2004 and highlights trends in the field.

A collection of problems that introduces students to the use of discounted cash flow analysis in the valuation of fixed income securities. Students are required to estimate bond prices and yields to maturity, among other items.