Finance Case Study

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Case Studies in Finance: Managing for Corporate Value Creation Fourth Edition July, 2002 Robert F. Bruner Distinguished Professor of Business Administration Darden Graduate School of Business Administration University of Virginia Post Office Box 6550 Charlottesville, Virginia 22906 Email: brunerr@virginia.edu Web site: http://faculty.darden.edu/brunerb/

ABSTRACT: This book presents 46 case studies in finance, targeted toward upper-level undergraduates and introductory and intermediate-level MBA students. The purpose of these cases is to afford the basis for classroom discussion of tools and concepts. The range of topics includes value creation, market efficiency, economic profit, financial analysis and forecasting, cost of capital, capital budgeting, dividend policy, equity issuance, capital structure management, derivative securities, and mergers and acquisitions. The spirit of these cases is to link the study of value creation with a respect for the administrative point of view, and an orientation toward capital markets. All of the cases are set in 1995 or later; 61 percent are new or seriously updated since the third edition. The downloadable paper outlines the plan of the book and its table of contents. October 30, 2002

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Contents
FOREWORD FRONT MATTER NOTE TO THE STUDENT: HOW TO STUDY AND DISCUSS CASES Case Part I: Setting Some Themes 1 2 3 4 5 WARREN E. BUFFETT, 1995 THE FIDELITY MAGELLAN FUND, 1995 JEANNE MOCKARD, AT PUTNAM INVESTMENTS BEN & JERRY'S HOMEMADE INC. THE BATTLE FOR VALUE: FEDERAL EXPRESS CORPORATION VS. UNITED PARCEL SERVICE OF AMERICA INC. (ABRIDGED) Part II: Financial Analysis and Forecasting 6 7 THE FINANCIAL DETECTIVE, 1996 THE BODY SHOP INTERNATIONAL PLC 2001: AN INTRODUCTION TO FINANCIAL MODELING 8 9 10 11 12 PADGETT PAPER PRODUCTS CO. KOTA FIBRES LTD. DEUTSCHE BRAUEREI SERVERVAULT: "RELIABLE, SECURE, AND WICKED FAST" BEST PRACTICES IN ESTIMATING THE COST OF CAPITAL: SURVEY AND SYNTHESIS 13 14 15 16 17 17 19 20 21 NIKE INC. COKE VS. PEPSI, 2001 TELETECH CORPORATION 1996 PAGINAS AMARELAS THE INVESTMENT DETECTIVE FONDERIA DI TORINO DIAMOND CHEMICALS LTD (A) DIAMOND CHEMICALS LTD (B) GENZYME/GELTEX PHARMACEUTICALS JOINT VENTURE Cost of capital for the firm Cost of capital and EVA for competitors Business segments and risk-return tradeoffs Estimating discount rates for emerging markets Investment criteria and discounted cash flow Analysis of an automation investment Relevant cash flows Mutually-exclusive investment opportunities Staged versus up-front investing Analysis of growth and bank financing Forecasting seasonal financing needs Forecasting and policies regarding growth "Burn rate" of the high-growth firm Estimating the cost of capital Ratio analysis Introduction to forecasting To think like an investor Market efficiency Opportunity cost Value creation and governance Value creation and economic profit Topic

Part III: Estimating the Cost of Capital

Part IV: Capital Budgeting and Resource Allocation

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22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

EUROLAND FOODS S.A. STAR RIVER ELECTRONICS LTD EASTBORO MACHINE TOOLS DONALDSON LUFKIN, JENRETTE 1995 (ABRIDGED) eBay Inc. (A) PLANET COPIAS & IMAGEM INTRODUCTION TO DEBT POLICY AND VALUE TECHNICAL NOTE: STRUCTURING CORPORATE FINANCIAL POLICY MCI COMMUNICATIONS CORP: CAPITAL STRUCTURE THEORY POLAROID CORPORATION, 1996 ROSARIO ACERO S.A. THRESHOLD SPORTS LLC MERTON ELECTRONICS AMTRAK ACELA CORNING INC. ZERO COUPON CONVERTIBLE DEBENTURES ENRON CORPORATION'S WEATHER DERIVATIVES (A) ROCKY MOUNTAIN ADVANCED GENOME YEATS VALVES AND CONTROLS INC. CHRYSLER CORPORATION PALAMON CAPITAL PARTNERS GENERAL MILLS' ACQUISITION OF PILLSBURY PRINTICOMM'S PROPOSED ACQUISITION OF DIGITECH STRUCTURING REPSOL'S ACQUISITION OF YPF HOSTILE TAKEOVERS: A PRIMER FOR THE DECISION MAKER THE HILTON/ITT WARS

Strategic resource allocation Capital project analysis and forecasting Dividend and stock buyback decisions Initial public...
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