Contents
PART ONE
FINANCING CURRENT
OPERATIONS
Introductory Exercises
1
3
Financial Ratio Analysis
Assessing a Firm's Future Financial Health
Forecasting Pro Forma Financial Statements
Tire City, lnc.
17
Estimating Funds Requirements Short-Term Sources of Funds
21
Funding Growth
Butler Lumber Company
Note on Bank Loans
Funding Seasonal Needs
Toy World, ln c.
Funding Cyclical Needs
SureCut Shears, lnc.
Managing Working Capital
Dell's Working Capital
Cash Budgeting
Hampton Machine Tool Company
PART TWO
CAPITAL STRUCTURE, LONG- TERM
FINANCING, AND RISK
MANAGEMENT
Debt Policy and Long- Term Financing
Target Debt Policy
E. l. Du Pont de Nemours and Company (1983)
Costs of Financial Distress
Williams, 2002
The Loewen Group, lnc. (Abridged)
Capital Structure Decisions
American Home Products Corporation
Debt Policy at UST lnc.
Diageo plc
Earnings Impact of Leverage
Continental Carriers, lnc.
Pricing Debt Instruments
Fixed lncome Valuation
Credit Ratings and Access to Debt Markets
3
21
25
39
45
53
59
65
67
67
79
93
107
113
129
143
147
Hospital Corporation of America (A)
Equity Financing
Stone Container Corporation (A)
MCI Communications'Corporation (1983)
Cox Communications, lnc. (1999)
Cross -Border Financing
Compañia de Teléfonos de Chile
Cash Distribution
Dividend Policy at FPL Group, lnc. (A)
Recapitalization
Ford Motor Company's Value Enhancement Plan (A)
Event Risk
Marriott Corporation (A)
Derivative Instruments and Risk
Management
Basic Derivative Instruments
lntroduction to Derivative lnstruments
Valuing Derivatives
Sally Jameson: Valuing Stock Options in a Compensation
Package (Abridged)
Interest Rate Derivatives
Student Educational Loan Fund, lnc. (Abridged)
Options and Security Design
Arley Merchandise Corporation
Pension Fund Risk Management
The Pension Plan of Bethlehem Steel (2001)
Risk Identification and Selection of Risk-Management
Techniques
Tiffany & Company (1993)
United Grain Growers Limited (A)
151
165
179
193
211
225
243
261
277
277
297
301
311
319
337
347
PART THREE
VALUATION AND INVESTMENT
363
Valuing and Selecting Investment
Opportunities
365
Discounted Cash Flow Analysis
Valuing Capital lnvestment Projects
Introduction to Decision Trees
Merck & Company: Evaluating a Drug Licensing Opportunity
Basic Value Creation
Tree Values
Identifying Incremental Cash Flows
The Super Project
365
371
377
381
Forecasting Expected Cash Flows
NetFlix.com, Inc.
A-Rod: Signing the Best Player in Baseball
Capital Budgeting
Ocean Carriers
Whirlpool Europe
Multiples
Health Development Corporation
Cost of Capital and Valuation
Cost of Capital
Diversification, the Capital Asset Pricing Model, and the
Cost of Equity Capital
Capital Asset Pricing Model and the Cost of Equity
Capital
Cost of Capital at Ameritrade
Risk and the Opportunity Cost of Capital
Pioneer Petroleum Corporation
Leveraged Betas
Leveraged Betas and the Cost o/ Equity
Weighted Average Cost of Capital
Marriott Corporation: The Cost of Capital
(Abridged)
Lex Service PLC-Cost o f Capital
Valuation Alternatives
Sampa Video, Inc.
Capital Cash Flows: A Simple Approach to Valuing
Risky Cash Flows
Advanced Valuation
Valuing Projects and Businesses
Radio One, Inc.
American Chemical Corporation
Valuing Compa nies
Adecco SA 's Acquisition ofOlsten Corporation
Cooper Industries, Inc.
Interco
Eskimo Pie Corporation (Abridged) 589 Netscape 's Initial Public
Offering
Hostile Takeovers
Gulf Oil Corporation-Takeover
Philip Morris Companies and Kraft, Inc.
Highly Leveraged Transactions
John M. Case Company
395
405
419
425
431
435
435
447
467
473
483
493
503
505
523
523
537
549
565
573
601
611
619
637
Congoleum Corporation (Abridged)
RJR Nabisco
Real Options
Laura Martin: Real Options and the Cable
Industry
Arundel Partners: The Sequel Project
Capital Projects as Real Options: An Introduction
649
667
PART FOUR
REVIEW AND SYNTHESIS
Integrated Financia l Decisions and Comprehe nsive Review
725
Staged Equity Financing
Pharmacyclics: Financing Research and
Development
Business Plan Evaluation
Valuing Project Achieve
Management Buyout
Seagate Technology Buyout
Merger and Acquisition
Friendly Cards, Inc.
Pinkerton 's (A)
Vodafone AirTouch's Bid for Mannesmann
Index of Cases
677
693
713
727
727
739
755
771
781
787
805