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Spreadsheet Supplement for case 295127

A Wall Street analyst has just learned that FPL (the holding company for Florida's largest electric utility) may cut its dividend in several days despite a 47-year streak of consecutive dividend increases. In response to the deregulation of the electric utility industry, FPL has substantially revised its competitive strategy over the past several years. The analyst must decide whether a change in dividend policy will be a part of FPL's financial strategy in this deregulated environment.

FPL's dividend policy and the reaction of the financial markets are examined.

A new CEO is hired to manage the turnaround of a family-owned newspaper publisher. In a departure from previous management, he implements a new compensation scheme that explicitly ties executive pay to market-value-based measures of firm performance. Because the company is not publicly traded, payoffs under the executive compensation plan are based on the firm's appraised value. Determining a value for this company (including any value created by the turnaround manager) is a complicated exercise. Additional complications arise because the firm's value also determines potential cash distributions to family members who wish to sell their shares back to the company. Certain family goals may also be inconsistent with the CEO's objective of maximizing the present value of the firm's assets.

Spreadsheet Supplement for case 295114

Students evaluate the proposed terms of the Renault-Volvo merger, examining the shareholders' perspective. The case describes the unusual structure of the strategic alliance that predated the merger proposal, the motives for merging, and the expected financial synergies. This case may be taught singly or in combination with the epilogue case, "Volvo/Renault: The Contest for Shareholder Approval".

Orange County, Metallgesellschaft, Procter & Gamble, and Gibson Greetings all have one thing in common: all are losers in the new global derivatives markets. Those visible losses in a market that has long been suspected of being uncertain and dangerous have raised new concerns about the stability of the international financial system. Two new publications provide contrasting perspectives on the issue. In The Vandals' Crown: How Rebel Currency Traders Overthrew the World's Central Banks, U.S. journalist Gregory J. Millman warns about the potential power of the free marketers from Chicago who trade anything that can be priced. The other perspective comes from a report by the Bretton Woods Commission led by Paul Volcker, former chairman of the Federal Reserve. The authors of Bretton Woods: Looking to the Future argue that regulators must defend and strengthen the markets against the speculative attacks of the traders. Richard O'Brien, chief economist of American Express Bank, gives his perspective on the struggle, and John Calverley, American Express Bank's chief investment strategist, writes a companion piece on the currency wars between governments and the markets.

Britain's Imperial Chemical Industries (ICI), founded in 1926, was for decades the dominant producer in its home market. As early as the 1940s, the board wondered whether a company so big and diverse was manageable, but ICI kept growing. During the 1980s, the company sought new sources of growth to offset sluggish sales of older products. The result was increased complexity of an already hard-to-manage portfolio. The stock price failed to reflect the value of many of ICI's businesses, and a takeover threatened the company in 1991. A company task force, aided by outsiders, discovered that ICI's businesses could be divided into two clusters. Each group needed its own style of corporate parenting, and ICI could not parent both of them effectively. In 1992, ICI spun off its pharmaceuticals, agrochemicals, and specialty chemicals into a second company called Zeneca. So far, the demerger has been a financial success. ICI's story shows how parenting skills that are developed in one phase of an industry's evolution may become less relevant in the next. The challenge for managers of multibusiness companies is to recognize the shift--and act on it before a crisis.

Amoco Corp. is negotiating to sell a wholly-owned subsidiary, MW Petroleum, to Apache Corp. MW owns large reserves of oil and gas comprising many properties at different stages of engineering, development, and production. The proposed acquisition is a large one for Apache and poses several important financing and valuation problems. This case focuses on evaluation and execution of a creative financing structure that allows the buyer and seller to reallocate oil price risk.

Spreadsheet Supplement for case 295045

Spreadsheet Supplement for case 395151

Michael Bourland, the president of the Bourland Companies, needs to refinance two properties, an office building in southern New Hampshire and a retail property in Massachusetts. He is considering three alternatives: a renewal of a bank mini-perm, a 15-year mortgage from an insurance company, and a new securitized loan offered by the Bank of Boston. The case focuses on issues related to mortgage securitization and how it stacks up against other products in the market. Also raises issues about family real estate businesses.

This crossfunctional case in economics and finance highlights the concerns about protection of intellectual property rights as well as competition from traditional retailers in Shanghai's prime shopping venue. It begins with the history that led to Xiangyang Market's development, and concludes with a description of the future of the market. Located at the center of the shopping district in the trendy former French concession in Shanghai, the market is considered a shopper's paradise by many foreign visitors. This open-air bazaar is known for the incredible deals on quality knockoffs of designer products. The case includes an account of the shopping experience of two American tourists, giving details of their discoveries and bargaining sessions in the market.

Describes the principal conventions used to report yields on debt instruments.

An entrepreneur who is anxious to start a business manufacturing a pasta server requires funds to finance the acquisition of equipment and working capital. A venture capital investor demands a cash budget for the first year of business as well as projected financial statements.

Second Cup, the largest chain of specialty coffee stores in Canada, wants to raise money through an initial public offering in order to pay off the company's long-term debt and take advantage of growth opportunities. Nesbitt Thomson, the investment dealer working on the initial public offering, must decide what the company is worth and how many shares to issue in order to raise $14 million.

A closed-end mutual fund's decision to study option trading provides an opportunity to study the profit profile and pricing of multiple option investment strategies (e.g., buy a call, buy a put, write a call, buy stock-write call, etc.). This case is designed to provide students with an introduction to option pricing.

Provides a review of valuation techniques used to assess cross-border investments. Discusses the discounting of free cash flows with a weighted average cost of capital and the use of adjusted present value. Special concerns such as foreign-exchange risk, country risks, and international diversification are also discussed. Unlike Note on Cross-Border Valuation, this note contains no discussion of valuing real options. A rewritten version of an earlier note.

Spreadsheet Supplement for case 295100