College of Business Administration
Loyola Marymount University
MBAF 620: Financial Strategy
Fall 2006
Instructor: Dr. David Offenberg Office Hours:
Office: Hilton 200C W: 5:00 p.m. - 7:00 p.m.
Phone: (310) 338-2903 (or by appointment)
E-mail: doffenberg@lmu.edu
Class time: Wednesday, 7:15 - 10:00 p.m. (HIL 023)
Course Overview:
The purpose of this course is to study the impact of corporate financial strategy on shareholder wealth. In
essence, this course covers the fundamentals of MBAA 608 with a lot more depth. Throughout the
semester, we will examine real situations that were faced by real chief financial officers. In the end, you
should have a much better appreciation for the role of the CFO in keeping the corporation afloat.
Method:
This course is taught via case studies supported by lectures. Class sessions begin with a lecture that will
help prepare students for the material that will be discussed the following week. The remainder of the
class period will be dedicated to analysis of the assigned case. Students have substantial responsibility
(and incentives) for coming to class prepared to engage in active discussion. Each student is expected to
work in a team to analyze the cases.
Readings:
Lecture notes and cases will be the primary source of material for this course.
The textbook for the course is: Case Problems in Finance, by Kester, Ruback and Tufano,
Twelfth Edition, publisher: McGraw Hill- Irwin.
The MBAA 608 textbook is also a useful reference, but not required: Brigham and Ehrhardt,
Financial Management: Theory and Practice, Eleventh Edition, Publisher: Thomson.
Policies:
Groups: Most of the work in this course is to be done in groups. Before the end of the first class
session, you will be asked to form a group of no more than three. There must be six groups total
in the class, so some groups may have less than three members. Once you have joined a group,
you must remain in it throughout the semester. Your group will have to meet at least once a
week, so make sure that you can schedule a weekly meeting time with your teammates before you
submit your group members.
Name cards: By the second class, you are required to have a name card that will attach to the
front panel of the desk and be easily readable from the front of the classroom. This name card
must show your first and last name. The exact dimensions, choice of material, and means of
affixing the name card each week are left to your discretion.
Seating: There is no set seating chart for this class. You are free to sit wherever you want.
Electronics: Please turn off all audible ringers on phones, pagers, and laptops before class begins.
Academic Honesty: No form of academic dishonesty, including cheating, will be tolerated. All
suspected cases of academic dishonesty will be handled as described in the LMU Honor Code
Process.
Observation: It is a practice in the College for faculty members to observe classes taught by other
faculty. From time to time, therefore, faculty from our College or even from other colleges may
attend classes.
Grading: Course grades are based on:
Case Presentations (5% each) 10%
Case Memos (2% each)
20%
Participation
20%
Final Exam
50%
Case Presentations:
Each group will be responsible for two case presentations of approximately 15 minutes. Note that
groups presenting the case need not turn in a case memo. Every member of the group must present a part
of the team’s analysis.
Each week, a group of students will prepare a team presentation. The presentation should be delivered
as though the class is your client and you are trying to sell your services. There are three basic
components that should be discussed: 1) the issue that needs to be resolved, 2) the relevant facts, 3) your
team’s approach and recommendations. Following each presentation the discussion will then open to the
whole class. Questions are encouraged both during and after the presentation. Ideally the class as a whole
will interactively come to an understanding of the problems presented in the case.
Cases will be assigned to groups at random following the first class session. If you know that you will
be unable to attend a class session because of a work-related obligation, please send me an e-mail
immediately so that I can be sure not to assign your group to that case.
Case Memos:
Ten case memos are required. The objective in using case studies is to provide examples of companies or
individuals that have faced the topic at hand and to apply theoretical tools to real problems. The content
of the case write-up is as follows:
1. The case memos may be done in groups, with all group members receiving the same grade for the
write-up.
If your name is on the report as part of the group, it means you participated in the analysis.
You are on the honor code to observe this requirement.
2. The case memo will be a two-page single spaced (maximum) report. The two page maximum does not
apply to exhibits such as graphs and tables, but please keep these to a minimum. You may use as
many exhibits as necessary but the exhibit must be referred to in your write-up. The case write-up
should be in 12 point type with 1 inch margins.
3. Case questions will be provided on Blackboard, and are designed to help you streamline the issues to
be addressed. If you believe that these questions do not effectively address the problems in the case,
feel free to go outside the parameters of the questions.
4. It is not necessary to rehash the case situation in your write-up. Do not, however, assume that I know
every single number and detail. Use your best judgment on how much of the case to include in your
write-up.
5. Most importantly, you must take a position regarding the problem in the case and make specific
recommendations on how to solve it. Support your recommendation as succinctly and as effectively
as you can.
Class Participation:
It is important that everyone come prepared to "open the case" and to discuss in detail the problem and
its potential resolution. Therefore, a portion of your grade will be based on your contribution to in-class
discussions of the material. Each non-exam day, you will be given a participation score as follows:
0 – Did not attend class.
1 – Attended but did not participate.
2 – Participated.
3 – Participated in a significant way.
These scores will be posted online, typically within 24 hours of class. Your class participation grade
will be assigned based on the sum of your daily participation scores in relation to the rest of the class.
Please note that I will not answer questions about course material during the breaks or after class. If you
have a question that is not of a personal nature, please ask it during class.
----------------------------------------------------------------------------------------------------Daily Class Schedule
----------------------------------------------------------------------------------------------------I. Overview of Course & Introduction to Financial Strategy
Wednesday, August 30
Case: Tire City (pg. 17)
Reference: Brigham and Ehrhardt, Chapters 13 & 14
II. Capital Structure
Wednesday, September 6
Case: Butler Lumber Company (pg. 21)
Read: "Note on Bank Loans" (p.25)
Reference: Brigham and Ehrhardt, Chapters 22 & 27 (pp.16-24)
Wednesday, September 13
Case: The Loewen Group, Inc. (pg. 93)
Reference: Brigham and Ehrhardt, Chapters 16 & 17
Wednesday, September 20
Case: Diageo plc (pg. 129)
Reference: Brigham and Ehrhardt, Chapters 16 & 17
Wednesday, September 27
Case: MCI (pg. 179)
Reference: Brigham and Ehrhardt, Chapter 21
Wednesday, October 4
Case: Ford (pg. 243)
Reference: Brigham and Ehrhardt, Chapter 18
III. Valuation
Wednesday, October 11 – No Class
Wednesday, October 18
Case: NetFlix (pg. 395)
Reference: Brigham and Ehrhardt, Chapters 10 & 11
Wednesday, October 25
Case: Ocean Carriers (pg. 419)
Reference: Brigham and Ehrhardt, Chapters 10 & 11
Wednesday, November 1
Case: Ameritrade (pg. 447)
Reference: Brigham and Ehrhardt, Chapters 4 & 5
Wednesday, November 8
Case: Marriott Corporation (pg. 483)
Reference: Brigham and Ehrhardt, Chapter 9
Also: Cynthia Cooper presentation, 6:00 p.m., HIL 100 (We will begin class once this
lecture ends.)
IV. Advanced Topics
Wednesday, November 15
Case: Eskimo Pie (pg. 589)
Reference: Brigham and Ehrhardt, Chapter 19
Wednesday, November 22 – No Class
Wednesday, November 29
Case: Seagate Technology (pg. 755)
Reference: Brigham and Ehrhardt, Chapter 25
Wednesday, December 6
Case: Bethlehem Steel (pg. 319)
Reference: Brigham and Ehrhardt, Chapter 29
Final Exam: Wednesday, December 13
• The exam will be a case or a sequence of problems. You will have three hours to complete the
exam.
Changes in the syllabus and course materials may be made at the discretion of the instructor.