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The publicly held corporation has not outlived its usefulness. Though LBOs release much of the untapped value and correct many of the inefficiencies of large public companies, they also have a limited demand and a limited life. The public corporation is inherently flexible and self-renewing. A four-point plan to maximize shareholder value will help public companies to: 1) find the highest valued use for all assets; 2) limit investment to opportunities with credible potential to create value; 3) return cash to shareholders when such investments are not available; and 4) establish incentives for managers and employees to focus on the critical drives that create value.

In this interview, Gary Wilson, executive vice president and CFO of the Walt Disney Co., discusses combining financial sophistication with an imaginative, strategic approach to business. Interviewer: Geraldine E. Willigan.

The note describes a short-run operating decision-making model that may be used to evaluate alternate courses of action. The note covers qualitative versus quantitative analysis, relevant costs for the model, and differential investments. As well, cost behaviour, financial charges on new investments and divestments are also covered.

The vice-president finance for a Canadian manufacturer has to decide how best to refinance a Swiss franc loan that is about to mature. The case involves consideration of interest rate risk and foreign exchange risk. The case is designed to introduce students to borrowing in international markets. It gives students an idea of the many opportunities to borrow internationally. By examining the cost of the previous loan, students should gain an appreciation of how changes in exchange rates can affect the cost of a loan.

The focus of the case is on the privatization of Saskatchewan Oil and Gas Corporation by way of an initial public offering. It is written from the perspective of an investment banker, Wood Gundy, who has been requested to submit a proposal to the privatization steering committee. All aspects of a deal are present; valuation, distribution, corporate governance, security design, ownership restrictions, domestic/global, institutional/retail, etc.

Unicorp Canada has announced a tender offer for Union Enterprises Ltd. Unicorp management must devise a strategy subsequent to the hostile takeover offer. The case illustrates the full range of actions, from political to scorched earth, available to a target in defending itself in a hostile situation. (This is a sequel to Unicorp Tender for Union Enterprises (A), case 9A90B034.)

A positive covenant on a $200 MM floating rate loan required Columbia River Pulp (CRP) to hedge a minimum of $100 MM for at least three years at a maximum rate of 12 percent. The alternatives included interest rate SWAPs, CAPs and COLLARs. What is the optimal hedging structure? Should CRP hedge all of its floating rate debt, or only the amount required under the loan agreement? (This case can be used with two related cases bearing the same name, 9A95B034 and 9A90B036. A Microsoft Excel spreadsheet is available for use with this case, product 7A90B037.)

A lending officer of Confederation Bank is reviewing a request from the owners of Sophisticated Petites for a term loan to finance leasehold improvements at their planned third dress shop. The account manager must perform a complete size up of the firm's existing and proposed operation and must generate a projected income statement and balance sheet for the oncoming year.

Eagle Corp. has made a tender offer for a further 15% of the shares of Blue Jay Energy. The price is well below what some feel is the real value of the shares. The focus of the case is on strategies to close a potential value gap in the context of a hostile takeover bid. The primary alternatives are to rely on a poison pill, spin-off and a leveraged recapitalization. The case is ideal to illustrate the use of the financial markets (synthetic white knight) to negotiate a deal.

Set two years after a takeover attempt forced the company to restructure by leveraging up, selling assets, and repurchasing stock. The case affords an opportunity to analyze what effect the restructuring had on: 1) the cost of capital, 2) investment decisions, and 3) the competitive behavior of other firms in the industry.

Spreadsheet Supplement for case 290016.

Explores the process of purchasing a single family house through the eyes of a young couple. The couple is trying to determine what type of home to buy as well as how to finance it.

A vehicle for analyzing the exposure of operating cash flows to exchange rate changes. Considers the value of Jaguar plc at the time of its privatization and share offering in 1984. Jaguar is a major exporter from the United Kingdom and the United States is therefore exposed to changes in the dollar/sterling exchange rate. Students are asked to estimate the value of the company as a function of expected future exchange rates. Students may also be asked whether and how Jaguar's exposure should be hedged.

Spreadsheet Supplement for case 290005.

The publicly held corporation has outlived its usefulness in many sectors of the economy. New organizations are emerging. Takeovers, leveraged buyouts, and other going-private transactions are manifestations of the change. A central source of waste in the public corporation is the conflict between owners and managers over free cash flow. This conflict helps explain the prominent role of debt in the new organizations. The new organizations' resolution of the conflict explains how they can motivate people and manage resources more effectively than public corporations. McKinsey Award Winner.

Bill Hassett, a partner in the Nelson Companies, has to make some important decisions regarding the expansion of Prospect Hill Executive Office Park in Waltham, Massachusetts. The pre-development issues concerning him about the Hillside Building include how to position Hillside in a softening market, how to handle certain parking issues, and whether expanded day care facilities would enhance lease-up or increase expenses. He is also considering arranging an interest rate hedge on the adjustable rate interest. This case deals with suburban development issues, and focuses on adapting to possible structural changes in the real estate industry.

Northwest Airlines is evaluating improvements to its revenue management system. This system executes a program of economic price discrimination under which the airline attempts to control the conditions on its discount fare offerings. Students must evaluate the effect of deregulation on the economics of the airline industry, and weigh the importance of aggressive asset management. They must then evaluate price discrimination as a means for airlines to maximize the profit contribution from the fixed inventory of seats on each flight. A secondary issue for the case (though it is crucial for airlines) is the importance of the proposed technology to Northwest's competitive position in the industry.

This case involves the evaluation of a complex financing for Sallie Mae. The financing is a reverse PERL, which is a foreign-currency issue. Sallie Mae must consider the pricing of the issue as well as the effectiveness of the proposed hedging arrangement.

Spreadsheet Supplement for case 289063.

The student must determine the financing requirements posed by growth, change of inventory policy, and introduction of new product and then select the best method of financing them. Has been used as a four-hour exam. A revised and updated version of an earlier case by L.E. Thompson and V.L. Andrews.