個案總覽

Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and U.S. markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets and negatively with the U.K. market. The ability to arbitrage these disparities and their causes are major case focal points.

A large diversified steel and energy firm is pressured by a corporate raider to spin off its steel business in order to increase its stock price. As an alternative to the spinoff, management proposes replacing the company's common stock with two new classes of "targeted" stock that would represent separate claims against each business segment's cash flows, allowing the stock market to value each business separately (and more accurately).

This case provides an opportunity to introduce and apply the pure-expectations theory of interest rates. It also brings out the fundamentals of option pricing by considering the refinancing option embedded in the long-term mortgage alternative. Because of the refinancing option, the spread charged by the bank for the long-term mortgage is too low, which suggests that an arbitrage opportunity is available by constructing a "homemade" interest-rate swap.

Free cash flow valuation problems: 1) build a simple pro forma, 2) value a public company's stock, and 3) evaluate a proposed LBO.

On April 12, 1995, Kirk Kerkorian made an unsolicited offer to buy the outstanding shares of Chrysler Corp. This case analyzes the proposed deal and addresses the key contextual elements contributing to the takeover attempt.

Spreadsheet Supplement for case 296078

Spreadsheet Supplement for case 296048

A professional turnaround manager attempts to implement a massive global downsizing program at the world's largest producer of consumer tissue products. The plan involves laying off almost one third of the company's 34,000 hourly and salaried employees and dramatically changing the company's business focus through massive asset sales-all in less than a year.

The treasurer of The University of Western Ontario was preparing a recommendation to the Spencer Hall board of directors concerning the financing of the $7.7 million expansion to Spencer Hall. The expansion was currently being financed with short-term loans but the board was concerned about increasing rates and was considering such hedging vehicles as interest rate swaps, caps and collars. A follow-up case is available (9A97N004).

The loans manager at the Dorchester, Ontario, branch of the Canadian Commercial bank, needs to determine whether to extend a personal loan of $60,000 to the client. The loan is going to be used as a down payment to buy out Plumb Parts Supply (PPS) Ltd. from the client's father. Since profit from the company would constitute the client's only source of income, the loan officer must examine PPS Ltd.

CompuServe, an online services vendor, informs its software developers that they must enter into a licensing agreement to use the popular GIF compression. CompuServe claims that it is forced to do so because Unisys is enforcing its patent rights in this area. Others argue that CompuServe's move is a response to the growing competitive challenge posed by the Internet.

Spreadsheet Supplement for case 296057

A company nears the end of a long multiyear turnaround and now must consider how to "cash out" so its management can realize a financial return on investment. The privately held company has several options, including a leveraged ESOP and a leveraged recapitalization.

Explores the peso crisis of 1994-95 and why it occurred. Students must examine Mexico's policies, the capital market's reactions, and the implications of devaluation for future capital flows and growth.

Spreadsheet Supplement for case 296056

Spreadsheet Supplement for case 296049

Helps students to understand how the characteristics of a business are reflected in its financial statements.

An investment advisor in an RBC Dominion Securities Inc. branch office, was considering whether or not to implement a price momentum strategy for his clients. Trend and Cycle, Dominion Securities' technical research department, had recently circulated a copy of a study which described a simple price momentum model and referred to its startling results based on back-testing the strategy over a fifteen-year period. The Trend and Cycle group had long promoted the importance of price momentum and relative strength to potential clients. The investment advisor needed to determine whether the proposed model was too good to be true or, if it did look promising, how he would go about implementing such a strategy for his clients.

Weston Presidio Capital encounters substantial difficulties while raising its first fund. The incentives and roles of investment advisors ("gatekeepers") pension funds and consultants are explored. The relationship with lead investors is considered.

Many companies today find themselves with a surplus of cash and a shortage of places to use it. In the past five years, more than 1,300 companies have stashed upwards of $150 billion into their coffers. Yet when CEOs look for ways to spend that cash, they find few options. This litany, however, precludes one important option--nonsynergistic acquisitions. A new study by McKinsey consultants Patricia L. Anslinger and Thomas E. Copeland has found that companies can pursue nonsynergistic deals profitably. In fact, their yearlong research has uncovered a diverse group of organizations, including Thermo Electron, Sara Lee, and Clayton, Dublier & Rice, that have grown dramatically and captured sustained returns of 18% to 35% per year by making nonsynergistic acquisitions.