Ivey Publishing

Foundations of Finance: The Logic and Practice of Financial Management

Keown, A.J., Martin, J.D., Petty, J.W.,6e (United States, Pearson, 2008)
Prepared By Rida Elias, Ph.D. Student (General Management)
Chapter and Title Chapter Matches: Case Information
Chapter 1:
An Introduction to the Foundations of Financial Management

BCE INC.: FACING THE FUTURE
Stephen R. Foerster, W. Glenn Rowe, Heather Tobin

Product Number: 9B09N015
Publication Date: 9/24/2009
Revision Date: 5/11/2010
Length: 25 pages

BCE Inc. (BCE), one of Canada's leading integrated communications companies, faced numerous challenges. In the key wireless communications market, BCE was trailing its competitors on growth and revenue. BCE's share price was underperforming and shareholders, including the powerful Ontario Teachers' Pension Plan, were becoming concerned. In addition there were regulatory changes on the horizon that could have a serious impact on BCE's wireless division. BCE's chief executive officer (CEO) was faced with the task of improving BCE's competitiveness and shareholder value in a dynamic industry. What options did the CEO and his leadership team have, which ones were better for BCE and how could the better ones be executed in order to satisfy BCE's shareholders? The case provides a good opportunity to assess financial performance and assist in understanding the interaction of strategy and finance.

Teaching Note: 8B09N15 (13 pages)
Industry: Information, Media & Telecommunications
Issues: Value Enhancement; Strategy Development; Strategy Implementation; Financial Analysis
Difficulty: 4 - Undergraduate/MBA



JOHN LABATT LIMITED, 1992
Robert W. White, Ping Wang

Product Number: 9A95B041
Publication Date: 11/14/1995
Revision Date: 2/11/2010
Length: 14 pages

The purpose of this case is to permit a discussion about value creation, performance assessment, the case method and corporate finance. It is intended to be used in the first class in a corporate finance course.

Teaching Note: 8A95B41 (21 pages)
Industry: Manufacturing
Issues: Case Method; Restructuring; Valuation
Difficulty: 4 - Undergraduate/MBA


Chapter 2:
The Financial Markets and Interest Rates

TELUS CORPORATION: CAPITAL STRUCTURE MANAGEMENT
Paul M. Bishop, Larry Wynant, Ken Mark

Product Number: 9B06N020
Publication Date: 11/23/2006
Revision Date: 3/20/2012
Length: 21 pages

The chief financial officer (CFO) of TELUS Corporation (Telus) has just been informed that Moody's, a bond rating service, has downgraded the firm's credit rating to one notch below investment grade. The CFO's challenge is to determine what specific actions, if any, to recommend to the firm's audit committee. First, this case facilitates a discussion on how changes in capital structure impact a firm's earnings, stock price and flexibility to carry out plan. Second, students learn about how bond ratings are set and how a firm's bond rating affects its bond yield. Last, by focusing on the situation faced by Telus during challenging market conditions in 2002, students learn how to manage relationships with investors while in the midst of change.

Teaching Note: 8B06N20 (14 pages)
Issues: Financial Planning; Cash Flow; Financial Strategy
Difficulty: 5 - MBA/Postgraduate



BORDERS HOTEL CORP.
David C. Shaw, John A. Humphrey, Richard Nason

Product Number: 9B01B034
Publication Date: 7/23/2002
Revision Date: 12/7/2009
Length: 5 pages

The president of a new hotel venture faces a financing decision. The choices include: mortgage debt, common stock, or preferred and common stock. The president has to balance the impact of the financing alternatives on the viability of the venture, her investment returns, the investment returns of prospective outside investors and the financial and business risks.

Teaching Note: 8B01B34 (9 pages)
Industry: Accommodation & Food Services
Issues: Risk Analysis; Sensitivity Analysis; Debt Policy; Equity Financing
Difficulty: 4 - Undergraduate/MBA


Chapter 3:
Understanding Financial Statements and Cash Flows

PALMER LIMITED
Stephen R. Foerster, James E. Hatch, John A. Humphrey

Product Number: 9B01N020
Publication Date: 2/12/2002
Revision Date: 9/28/2011
Length: 9 pages

The accountant for Palmer Limited, a sheet metal sub-contractor, has been asked to provide a monthly cash budget along with the projected income statement and balance sheet for her client. The request came about because the banker is concerned about whether Palmer Limited can repay its loan.

Teaching Note: 8B01N20 (11 pages)
Industry: Construction
Issues: Financial Planning; Budgeting; Cash Budgeting; Cash Flow
Difficulty: 4 - Undergraduate/MBA



LEWIS & COMPANY
Craig Dunbar, Simon Parmar

Product Number: 9A99N013
Publication Date: 7/20/1999
Revision Date: 1/21/2010
Length: 4 pages

Grant Lewis, a Chartered Accountant (CA) and senior manager at a Big Six professional services firm, was investigating the feasibility of establishing a CA firm with two former colleagues. Mr. Lewis recognized the need for external financing during the start-up phase of the business. In preparation for a meeting with his bank manager, Mr. Lewis has been asked to prepare a projected monthly cash flow statement as well as a balance sheet and income statement for the first year of operations. The primary objective of the case is to get students to develop these financial statements and appreciate the links and differences between a cash flow and an income statement. The case also allows students to examine the bank lending process, discuss the merits and drawbacks of starting a small business, and become familiar with some of the basic components and sources of relevant market information for a new venture.

Teaching Note: 8A99N13 (7 pages)
Industry: Administrative, Support, Waste Management and Remediation Services
Issues: New Venture; Traffic Control; Financial Reports/Disclosure; Cash Budgeting
Difficulty: 4 - Undergraduate/MBA


Chapter 4:
Evaluating a Firm’s Financial Performance

FINANCIAL PERFORMANCE OF DELL COMPUTER
Craig Dunbar, Daniel Goldberg

Product Number: 9B01N017
Publication Date: 3/28/2002
Revision Date: 1/6/2010
Length: 14 pages

A financial analyst for Dell Computer Corporation, one of the world's largest computer systems manufacturers, has been asked by the treasurer to develop a report on the company's recent financial performance. Over the last few years, the company has realized it has lost approximately 50 per cent of its stock. Did this decline reflect industry and market wide effects or were there some emerging problems with Dell's operating performance? The financial analyst must analyse the company's financial statements and the cash flows of Dell and its competitors.

Teaching Note: 8B01N17 (11 pages)
Industry: Retail Trade
Issues: Computer Industry; Financial Analysis; Performance Measurement; Cash Flow
Difficulty: 4 - Undergraduate/MBA



BANK STOCK INVESTMENT DECISION
Stephen R. Foerster

Product Number: 9A96B055
Publication Date: 10/24/1996
Revision Date: 2/9/2010
Length: 20 pages

A pension fund manager was examining Bank of Montreal's recent financial performance in comparison with other large Canadian bank stocks, and large U.S. bank stocks as well, to determine what factors appeared to be driving the stock's performance. He then needed to consider whether to change the fund's investment in the stock. This case examines the usefulness of financial performance measures and examines what drives stock values.

Teaching Note: 8A96B55 (8 pages)
Industry: Finance and Insurance
Issues: Valuation; Financial Analysis; Financial Institutions
Difficulty: 4 - Undergraduate/MBA


Chapter 5:
The Time Value of Money

CADIM: CHINA AND INDIA REAL ESTATE DEALS
Stephen R. Foerster, Marc Folch

Product Number: 9B09N004
Publication Date: 1/30/2009
Revision Date: 7/6/2009
Length: 15 pages

The president and chief operating officer of Cadim, the real estate arm of the Caisse de Dépôt et Placement du Québec, Canada's largest pension fund management firm, had recently been approached with several interesting multimillion-dollar investment opportunities in India and China. Although Cadim was still deciding whether to invest in either country (see Cadim: The China and India Real Estate Market Entry Decisions case), if the company chose to do so, it wanted suitable partners and deals lined up. Each deal had its pros and cons, but the president knew all too well that the wrong combination of partner and deal could have dire consequences for Cadim's profits and the team's reputation. The case analysis involves risk assessment, partner assessment, cash flow analysis and portfolio fit analysis.

Teaching Note: 8B09N04 (10 pages)
Industry: Real Estate and Rental and Leasing
Issues: China; Internal Rate of Return; Valuation; Investments
Difficulty: 4 - Undergraduate/MBA



PEPSICO CHANGCHUN JOINT VENTURE: CAPITAL EXPENDITURE ANALYSIS
Larry Wynant, Claude P. Lanfranconi, Peter Yuan, Geoff Crum

Product Number: 9B00N016
Publication Date: 2/2/2001
Revision Date: 1/12/2010
Length: 15 pages

PepsiCo Inc. spanned more than 190 countries and accounted for approximately one-quarter of the world's soft drinks. The vice-president of finance for PepsiCo East Asia had been collecting data on the firm's proposed equity joint venture in Changchun, People's Republic of China (PRC). While PepsiCo was already involved in seven joint ventures in the PRC, this proposal would be one of the first two green-field equity joint ventures with PepsiCo control over both the board and day-to-day management. Every investment project at PepsiCo had to go through a systematic evaluation process that involved using capital budgeting tools such as new present value (NPV) and internal rate of return (IRR). He needed to decide if the proposed Changchun joint venture would meet PepsiCo's required return on investment. He was also concerned what the local partners would think of the project. The final decision would be made after a presentation to the president of PepsiCo Asia-Pacific.

Teaching Note: 8B00N16 (11 pages)
Industry: Manufacturing
Issues: China; Net Present Value Method; Joint Ventures; Financial Analysis; Internal Rate of Return
Difficulty: 4 - Undergraduate/MBA


Chapter 6:
The Meaning and Measurement of Risk and Return

VALUING WAL-MART STOCK
Stephen R. Foerster

Product Number: 9B06N009
Publication Date: 2/16/2006
Revision Date: 3/30/2012
Length: 14 pages

An investment advisor at a major brokerage is considering whether she should recommend Wal-Mart stock to her clients who do not currently have this stock in their portfolios. Students will be presented with basic valuation concepts including the dividend discount model, price-earnings model and applications of the capital asset pricing model.

Teaching Note: 8B06N09 (13 pages)
Industry: Finance and Insurance
Issues: Financial Analysis; Stock Market; Securities; Investment Analysis
Difficulty: 4 - Undergraduate/MBA



VALUING COCA COLA STOCK
Stephen R. Foerster, Bruce Chin

Product Number: 9A97N017
Publication Date: 12/2/1997
Revision Date: 2/5/2010
Length: 9 pages

An investment advisor with a major brokerage firm gave investment suggestions and helped clients manage their portfolios. Some of her clients had Coca Cola stock in their portfolios and she wondered whether to recommend the stock to any of her new clients or clients that did not currently have Coca Cola in their portfolios. The case can be used to introduce the dividend discount model, capital asset pricing model, and price-earnings models.

Teaching Note: 8A97N17 (7 pages)
Industry: Finance and Insurance
Issues: Investments; Stock Market; Valuation; Investment Analysis
Difficulty: 4 - Undergraduate/MBA


Chapter 7:
The Valuation and Characteristics of Bonds

GREYDANUS, BOECKH & ASSOCIATES: THE YIELD CURVE KINK DECISION
Stephen R. Foerster

Product Number: 9A98N022
Publication Date: 11/19/1998
Revision Date: 2/2/2010
Length: 17 pages

A bond portfolio manager is re-evaluating the funds position in government bonds. His team had attempted to take advantage of a mis-priced bond and was now in the process of re-examining the recent move in interest rates, the current shape of the yield curve, and the forecast for interest rate changes. This case introduces students to fundamental bond valuation and price change issues, including duration and convexity, as well as bond management styles.

Teaching Note: 8A98N22 (10 pages)
Industry: Finance and Insurance
Issues: Investment Analysis; Bonds; Investment Funds; Portfolio Management
Difficulty: 4 - Undergraduate/MBA



MERRILL LYNCH CANADA INC. LIQUID YIELD OPTION NOTES
Robert W. White, K. Scott Dorsey, Bryan Mekechuk

Product Number: 9A96B008
Publication Date: 5/14/1996
Revision Date: 2/5/2010
Length: 17 pages

This case addresses the issues involved with fitting a complex financial instrument to an issuer and an investor. It elicits the participants to consider the unique requirements of issuers and investors and how the features of an instrument fulfil those requirements. The examination of the liquid yield option notes demonstrates that complex instruments can be broken down into a basket of primitive securities to assist the students in understanding the behaviour of the instrument and how it is priced.

Teaching Note: 8A96B08 (227 KB)
Industry: Finance and Insurance
Issues: Derivatives; Innovation; Financial Institutions; Bonds
Difficulty: 4 - Undergraduate/MBA


Chapter 8:
The Valuation and Characteristics of Stock

RICK THOMPSON'S STOCK INVESTMENT: COMPANY ANALYSIS
Stephen R. Foerster

Product Number: 9A99N007
Publication Date: 4/22/1999
Revision Date: 1/21/2010
Length: 5 pages

An investment advisor for National Securities Inc. had just met with a client who was looking for some interesting stocks to add to his portfolio of investments. He wanted to understand how to analyze a particular company's financial statements and project earnings, and a target share price. This case allows students to assess a particular company's financial statements in order to determine, based on the Dupont method, the drivers behind internal growth. The price-earnings valuation method is also presented. This case is the second in a series of three cases that focus on a variety of stock investment decisions. (See 9A99N006 and 9A99N009.)

Teaching Note: 8A99N07 (5 pages)
Industry: Finance and Insurance
Issues: Valuation; Investments; Investment Analysis; Financial Reports/Disclosure
Difficulty: 4 - Undergraduate/MBA



ROGERS COMMUNICATIONS INC. - MACLEAN HUNTER LIMITED
Robert W. White, David Robinson

Product Number: 9A96B046
Publication Date: 7/26/1996
Revision Date: 2/9/2010
Length: 22 pages

On Wednesday, February 2, 1994, Ted Rogers, president and CEO of Rogers Communications (RCI), announced that a strategic merger was being sought with Maclean Hunter Limited (MHL). Over the course of the last several weeks, a private company controlled by Mr. Rogers had purchased a block of stock representing approximately 8 percent of the shares held by the public. The focus of the case is to formulate a presentation to RCI's board of directors, which discusses the price, strategy and terms of a planned offer to acquire all remaining MHL shares.

Teaching Note: 8A96B46 (267 KB)
Industry: Information, Media & Telecommunications
Issues: Mergers & Acquisitions; Strategic Planning; Stock Tenders; Valuation
Difficulty: 4 - Undergraduate/MBA


Chapter 9:
Capital-Budgeting Techniques and Practice

MTR CORPORATION LIMITED: MEASURING THE COST OF CAPITAL
Larry Wynant, Stephen R. Foerster, Ken Mark

Product Number: 9B07N001
Publication Date: 3/16/2007
Revision Date: 11/18/2013
Length: 11 pages

Two MTR Corporation (MTRC) managers are participating in a week-long program in financial management. For their next class, they need to calculate the cost of capital for MTRC. First, they will review the concepts of investor expectations and cost of capital. Then, they must calculate the cost of capital by using the financial statements provided to them by the instructor. The two managers discuss their understanding of these concepts as they prepare their assignment, which is due in two hours.

Teaching Note: 8B07N01 (10 pages)
Industry: Transportation and Warehousing
Issues: Capital Structure; Capital Expenditure Analysis; Cost of Capital; Capital Budgeting
Difficulty: 4 - Undergraduate/MBA



WEST END MOTORS
John A. Humphrey

Product Number: 9A84B015
Publication Date: 1/1/1984
Revision Date: 4/28/2003
Length: 3 pages

The president and general manager of a franchised automobile dealership investigates a capital expenditure for a new body shop to replace a smaller, leased facility. The case is designed to test students on their knowledge of capital expenditure analysis, to underline the impact that inflation adjustments have on capital expenditure analysis, and to push students to make judgements on the key analytical figures that may have an impact on the net present value calculation.

Teaching Note: 8A84B15 (8 pages)
Industry: Other Services
Issues: Inflation; Capital Budgeting
Difficulty: 4 - Undergraduate/MBA


Chapter 10:
Cash Flows and Other Topics in Capital Budgeting

NEWGRADE ENERGY INC.
James E. Hatch, Saqib A. Khan

Product Number: 9B09N007
Publication Date: 5/14/2009
Length: 12 pages

In April 2007, the senior vice-president and chief financial officer (CEO) of Crown Investments Corporation of Saskatchewan (CIC) was faced with a challenging decision. CIC was contemplating the sale of 50 per cent interest in a heavy oil upgrader and wanted an assessment of the worth of the company. To obtain a reasonable estimate, the CEO had instructed an independent advisor with industry experience to provide input. In addition to receiving an estimate of value (based on the methods of free cash flow, comparables and precedent transactions), the CEO also had to formulate a strategy for selling off the company.

Teaching Note: 8B09N07 (11 pages)
Industry: Manufacturing
Issues: Valuation; Hill
Difficulty: 4 - Undergraduate/MBA



PLEASURE CRAFT INC.
Dan Thompson

Product Number: 9B05N010
Publication Date: 10/28/2005
Revision Date: 9/6/2011
Length: 8 pages

Pleasure Craft Inc. is a manufacturer of snowmobiles and personal watercraft. The company is looking into expanding it business into either outboard motors or front-end loaders. A new team leader has been asked to prepare financial analyses on each project and to recommend whether one or both projects should be pursued. The team leader must determine initial costs, estimate future cash flows, and calculate the cost of capital.

Teaching Note: 8B05N10 (11 pages)
Industry: Manufacturing
Issues: Capital Budgeting; Cost of Capital; Net Present Value Method
Difficulty: 4 - Undergraduate/MBA


Chapter 11:
The Cost of Capital

GOODWIN WEALTH MANAGEMENT: AN ACQUISITION OPPORTUNITY
Colette Southam, Lisa Conway

Product Number: 9B08N029
Publication Date: 12/8/2008
Length: 13 pages

On November 30, 2007, the chief executive officer (CEO) of Goodwin Wealth Management (Goodwin), decided to hire a consultant to make an assessment of his current situation. Recently, several firms had expressed interest in acquiring Goodwin. The CEO knew he would have to decide whether to consider these offers or not very soon in order to avoid a hostile bidding situation. If the CEO did decide to consider an acquisition, he would have to act quickly in order to take advantage of the current stock's high price. Further complicating the decision was the fact that Goodwin had been built by the CEO's father, George, who would try to influence the decision-making process. The CEO wanted to do what was best for the company while protecting his family's reputation. He awaited the advice from the consultant.

Teaching Note: 8B08N29 (9 pages)
Industry: Finance and Insurance
Issues: Financial Analysis; Business Valuation; Valuation; Mergers & Acquisitions
Difficulty: 4 - Undergraduate/MBA



ENCANA CORPORATION: THE COST OF CAPITAL
James E. Hatch, Larry Wynant, Ken Mark

Product Number: 9B07N002
Publication Date: 4/2/2007
Revision Date: 6/18/2010
Length: 7 pages

Two managers attending a week-long executive education course are working on an assignment which requires them to estimate the cost of capital for EnCana Corporation, a leading North American oil and gas producer. The two managers disagree about which costs need to be taken into account to complete the assignment. They are not sure about the costs of different sources of capital, the overall cost of capital and the appropriate use of the hurdle rate.

Teaching Note: 8B07N02 (9 pages)
Industry: Mining, Quarrying, and Oil and Gas Extraction
Issues: Cost of Capital; Valuation; Financial Analysis
Difficulty: 4 - Undergraduate/MBA


Chapter 12:
Determining the Financing Mix

B/E AEROSPACE, INC.
Wesley Marple

Product Number: 9B09N010
Publication Date: 6/26/2009
Revision Date: 2/26/2010
Length: 15 pages

B/E Aerospace, Inc., (BEAV) the market leader for cabin interior products for commercial aircraft and business jets, and a leading aftermath distributor of aerospace fasteners, was reviewing its financial strategy. BEAV was a heavily leveraged company in the cyclical aircraft products industry. Its business had been threatened by the terrorist act of September 11, 2001, the epidemic of SARS in 2003 and the war in Iraq in 2004. These events discouraged Americans from flying, bankrupting airlines and reducing their investments in aircraft. The company sold 18.4 million shares of common stock, raising $156 million to pay down some of its high-cost debt, reduce interest expense and achieve a more balanced capital structure. Still, after restructuring, debt on a pro-forma basis would constitute 79 per cent of its long-term capital. The chief financial officer was considering a more appropriate debt target and how the company might achieve it. Further, he was contemplating a $50 million reduction in debt from available cash. Students are to recommend a target capital structure and steps to achieve it. Data are available to apply theoretical and practical approaches to making recommendations in advanced undergraduate and graduate courses.

Teaching Note: 8B09N10 (13 pages)
Industry: Manufacturing
Issues: Financial Strategy; Leverage; Cost of Capital; Taxation; Northeastern
Difficulty: 4 - Undergraduate/MBA



HUTCHISON WHAMPOA LIMITED: THE CAPITAL STRUCTURE DECISION
G. Andrew Karolyi, Larry Wynant, Geoff Crum, Peter Yuan

Product Number: 9A99N021
Publication Date: 9/30/1999
Revision Date: 1/21/2010
Length: 24 pages

Hutchison Whampoa was considering strategies for its long-term capital structure. The HK$35 billion Hong Kong-based conglomerate had ambitious growth plans in multiple business sectors in different geographies. Traditionally, like many of its domestic peers, Hutchison had relied entirely on short to medium-term bank loans. Its demand for long-term financing, attractive rates in other capital markets (especially the U.S.) and concern about a more diversified investor base had led Hutchison to explore other financing options. In particular, the company was debating the benefits of a Yankee Bond Offering. At the time, Hutchison had already approached Moody's and Standard & Poor's for a bond rating.

Teaching Note: 8A99N21 (12 pages)
Industry: Finance and Insurance
Issues: International Finance; Financial Strategy; Capital Budgeting
Difficulty: 4 - Undergraduate/MBA


Chapter 13:
Dividend Policy and Internal Financing

TELUS CORPORATION: DIVIDEND POLICY
Paul M. Bishop, Larry Wynant, Ken Mark

Product Number: 9B08N007
Publication Date: 7/4/2008
Revision Date: 4/4/2008
Length: 21 pages

The vice-president (VP) and treasurer of TELUS has been asked by the chief financial officer for his opinion on the company's dividend policy and how many recommendations would be conveyed to investors. In developing his response, the VP needs to consider TELUS's future prospects, its leverage policy, the state of the telecommunications industry, and investor expectations. This case facilitates a discussion on dividend policy. Conventional wisdom on dividend policy can be reviewed and then interpreted in the context of the particular circumstances facing TELUS. The case can also facilitate a short discussion on the costs and benefits of share repurchase.

Teaching Note: 8B08N07 (10 pages)
Industry: Administrative, Support, Waste Management and Remediation Services
Issues: Dividend Policy; Financial Analysis; Debt Policy
Difficulty: 5 - MBA/Postgraduate



FINNING TRACTOR AND EQUIPMENT COMPANY LIMITED
David C. Shaw, David Porter

Product Number: 9A84B013
Publication Date: 1/1/1984
Revision Date: 5/20/2003
Length: 16 pages

President and CEO of Finning Tractor, has seen the earnings of the company drop below profitable levels because of a deep recession. Several restraint measures were instigated with little apparent impact. The case takes place at the point where a decision is impending on dividend policy with issues ranging from effect on stock price to the fact that the two majority shareholders may be adverse to taking a cut in the over $1.5 million in dividend income they were receiving annually.

Teaching Note: 8A84B13 (4 pages)
Industry: Construction
Issues: Dividend Policy
Difficulty: 4 - Undergraduate/MBA


Chapter 14:
Short-Term Financial Planning

KITCHEN HELPER INC.
Robert W. White, Jeff Hawkins

Product Number: 9A96B039
Publication Date: 7/26/1996
Revision Date: 2/5/2010
Length: 8 pages

The president of Kitchen Helper Inc. is seeking financing for his new invention. Commercial banks have refused to provide any further financing, and the president has rejected offers from venture capitalists. A private investor has expressed interest but wishes to see a cash budget and a pro forma income statement and balance sheet.

Teaching Note: 8A96B39 (18 pages)
Industry: Manufacturing
Issues: Cash Budgeting; Financial Planning; Forecasting; Funding
Difficulty: 4 - Undergraduate/MBA



CHAMPION ROAD MACHINERY
Stephen R. Foerster, Rob Barbara

Product Number: 9A95B028
Publication Date: 12/8/1995
Revision Date: 2/11/2010
Length: 12 pages

Scott Hall, vice-president of finance and chief financial officer of Champion Road Machinery Limited, was preparing a presentation on the company's proposed dividend policy for a board of directors' meeting scheduled for the middle of August. It had been only three months since the company completed its initial public offering, at which time the prospectus stated that: The company does not anticipate paying cash dividends on the common shares in the foreseeable future, but intends to retain future earnings for reinvestment in the business. However, earnings were well ahead of those projected in the prospectus and the company had succeeded in managing cash better than anticipated.

Teaching Note: 8A95B28 (5 pages)
Industry: Manufacturing
Issues: Dividend Policy; Cash Budgeting
Difficulty: 4 - Undergraduate/MBA


Chapter 15:
Working-Capital Management

TREEBONE DESIGN INC. — PRIVATE PLACEMENT
James E. Hatch, Bryce Munro

Product Number: 9B05N004
Publication Date: 4/11/2005
Revision Date: 10/4/2009
Length: 7 pages

The sole owner of Treebone Design, a custom furniture manufacturer in Montreal, wants to add a moulding division. The expansion requires $700,000 in funding for a new building plus additional funds for working capital. A developer proposes to provide financing but wants a portion of equity in return. Students must utilize an Excel model to assess the merits of the proposed deal, Ivey product 7B05N004.

Teaching Note: 8B05N04 (6 pages)
Industry: Manufacturing
Issues: Financing; Private Placement; Growth
Difficulty: 4 - Undergraduate/MBA



PATIO PLACE
John A. Humphrey, Roland Horst

Product Number: 9A81B012
Publication Date: 1/1/1981
Revision Date: 11/5/2003
Length: 14 pages

Two brothers had just completed their first year in business. Most of their initial funding was provided by the Federal Business Development Bank (FBDB). First year sales were far below expectations due to startup problems. The brothers have applied to FBDB for additional funds for the upcoming season. The FBDB assistant branch manager must decide whether to provide the additional funds, call the loan or develop other alternatives.

Teaching Note: 8A81B12 (10 pages)
Industry: Retail Trade
Issues: Financial Institutions; Cash Budgeting
Difficulty: 4 - Undergraduate/MBA


Chapter 16:
Current Asset Management

PROGISTIX-SOLUTIONS INC. - THE CRITICAL PARTS NETWORK
P. Fraser Johnson, Alison Woodcock

Product Number: 9B05D002
Publication Date: 1/28/2005
Revision Date: 9/28/2009
Length: 8 pages

The president and chief executive officer of Progistix-Solutions Inc. has asked an analyst to prepare an annual review of the Xerox Critical Parts Network for presentation to management in two weeks. The president expected the analyst to review the performance of the network and establish an improvement plan for the coming year, supported by specific goals and objectives. Although Xerox and Progistix had been satisfied with their relationship, after five years, both parties were interested in exploring ways to improve the network, particularly as competitors adopted similar approaches. In preparation for the meeting, the analyst wanted to explore opportunities in three specific areas. First, identify opportunities to improve depot operations. Second, he believed that opportunities existed to make additional improvements in the area of inventory management and he wondered how and where Progistix could work together with Xerox on such an initiative. Third, was to improve system-wide inventory turn performance by re-examining the cut-off point for filling the technicians' trunks with inventory. This case provides an opportunity for students to analyse a rapid-response supply chain and make recommendations for improvements. Class discussion can include issues related to supply chain partnerships, outsourcing, inventory management and demand forecasting. Data provided in the case allow students to develop implementation plans and set specific performance targets.

Teaching Note: 8B05D02 (9 pages)
Industry: Manufacturing
Issues: Supply Chain Management; Logistics; Inventory Planning/Control; Outsourcing
Difficulty: 4 - Undergraduate/MBA



MARILYN M.
James E. Hatch, Larry Wynant, Steven Cox

Product Number: 9A97N005
Publication Date: 3/5/1998
Revision Date: 2/5/2010
Length: 11 pages

Nancy Featherstone, an account manager with the Royal Bank, was assessing a client request for an expanded operating line of credit. Ashleigh Cosmetics Ltd., a Montreal-based manufacturer and distributor of women's cosmetics, planned to launch a new red lipstick line called Marilyn M. Ashleigh had applied for a $2,000,000 increase in its authorized operating line for a total of $4,500,000. The estimated increase was based partly on anticipated inventory and receivable peak levels for the new product.

Teaching Note: 8A97N05 (14 pages)
Industry: Manufacturing
Issues: Financial Analysis; Bank Lending; Financing
Difficulty: 4 - Undergraduate/MBA


Chapter 17:
International Business Finance

TOM.COM: VALUATION OF AN INTERNET COMPANY
Larry Wynant, Stephen R. Foerster, Peter Yuan

Product Number: 9B00N013
Publication Date: 8/10/2000
Revision Date: 1/12/2010
Length: 18 pages

AWARD WINNING CASE - This case was one of the winning cases in the 2000 Regional Asia-Pacific Case Writing Competition. The Internet investment craze was starting to catch on in Hong Kong. Tom.com Limited, a Hong Kong based Internet company, was planning an initial public offering at the Hong Kong Stock Exchange. A portfolio manager for EuroGlobal Funds was to provide his professional opinion on the value of this investment and its appropriateness for different investors. He was aware of the difficulties in valuing Internet companies and the debate over the choice of valuation methods. Among these, one approach was to analyze the implied hyper-growth rate that Internet companies had to achieve in the next five years in order to justify their current valuations. He decided to apply this approach to Tom.com. Students will have the opportunity to discuss the different valuation methods and the development of Internet and e-commerce companies, especially topics such as business models and expected growth.

Teaching Note: 8B00N13 (16 pages)
Industry: Administrative, Support, Waste Management and Remediation Services
Issues: China; International Finance; Internet; Valuation; Investment Analysis
Difficulty: 4 - Undergraduate/MBA



LUFTHANSA: TO HEDGE OR NOT TO HEDGE . . .
Stephen Sapp

Product Number: 9B00N022
Publication Date: 2/2/2001
Revision Date: 1/12/2010
Length: 3 pages

Lufthansa, the flagship German airline, was undertaking an aggressive expansion program. The chairman of the board had negotiated a deal with Boeing for the purchase of 20 new aircraft at a cost of US$500 million. The U.S. dollar was at historic highs and he had to decide how much, if any, of the US$500 million purchase price to hedge and best method to use. Since Lufthansa's revenues were mainly in deutsche marks and this amount was payable in one year, he needed to determine how to deal with the resulting foreign exchange risk by examining principle foreign exchange hedging strategies. Covenants restricting Lufthansa to take on new debt made it critical that he be sure of the financing and risk exposure before finalizing the deal.

Teaching Note: 8B00N22 (6 pages)
Industry: Transportation and Warehousing
Issues: Exchange Rates; Risk Management; International Finance; Hedging
Difficulty: 4 - Undergraduate/MBA