SHANGHAI UNIVERSITY
FOR SCIENCES AND TECHNOLOGY
Spring 2013 – CASE STUDIES IN CORPORATE FINANCE
CONTACT INFORMATION
PROFESSOR:
Pierre Yourougou, Ph.D., MBA
OFFICE:
PHONE:
EMAIL:
pyteaching@gmail.com
CLASS WEBSITE:
OFFICE HOURS: Immediately after class or
by appointment
Every effort will be made to respond to email within 24 hours of receipt. In some instances,
this may simply be an acknowledgement that the question has been received. If many students
are facing the same problem, an answer may be sent to the entire class or posted on the course
website provided that such facility is available. Emails sent over a weekend will normally be dealt
with on Monday.
COURSE DESCRIPTION AND LEARNING OBJECTIVES
This course is designed to deepen students’ understanding of how to apply corporate finance
concepts in a wide variety of business situations to make informed decisions in corporate finance.
The perspective taken will be that of a chief financial officer in their investment and financing
analysis and control activities. The course builds on concepts in business strategy, valuation
techniques, and capital structure theories covered in previous courses. It will assume that students
have a good understanding of fundamental concepts, such as the time value of money, capital
budgeting, risk/return trade- offs, and weighted average cost of capital.
The course will provide the students with the tools to
1. To critically employ financial management theory in practical settings, especially applied in
case studies
2. To understand the decisions facing a financial manager in a large corporation, particularly
those related to investment policy, financial policy, and corporate valuation and
restructuring.
3. To evaluate the effects of leverage, taxes and uncertainty on corporate investment and
financing decisions.
4. To appreciate the effects of capital market imperfections on corporate investment and
financing decisions.
COURSE FORMAT
The course will use the case method of teaching, supplemented with additional readings. The
strength of the case method is that it provides an opportunity to “simulate” complicated real-life
situations without having the luxury of years of professional experience. By using complex realworld problems as a focus, cases are designed to challenge students to develop and practice skills
that will be appropriate to practical problems that will be faced in their careers. As in real-life
situations, it is unlikely that any two people would assemble the data or make inferences
identically. Rather, case studies require independent thinking and grappling with the
multidimensional nature of the decision-making process. Like any manager in a business, cases
will be approached under time pressure, with decisions based on limited knowledge, and facing
many unknowns. Therefore, all students are urged to actively participate in solving, writing up and
presenting the cases.
Students should have a good understanding of basic finance concepts, as well as some
mathematical skills in algebra.
COURSE MATERIALS
TEXTBOOK:
There is no required textbook for this course.
Recommended textbook: Eugene F. Brigham, and Phillip R. Daves (BD),
Intermediate Financial Management, 11th edition, South-Western Cengage
Learning, 2012. Please note that any previous version or international version will
be fine. The recommended textbook is used for background knowledge for
those who need it.
LECTURE NOTES: Lecture notes will be handed out in class or made available through the
course reader. The lecture notes are designed to summarize the background
theoretical concepts covered in the case studies, but they are not sufficient
in and of themselves to substitute for a student’s own note- taking and
reading of the recommended textbook.
ARTICLES:
Students are strongly encouraged to follow the financial news media for
themselves. Recommended newspapers include The Wall Street Journal
and Financial Times; recommended magazines include The Economist,
CFO Asia
EXCEL:
A good knowledge of Excel is advantageous. A financial calculator will
also be needed for the course, and should be brought to each class for use
in solving problems and exercises.
GRADING
There will be a mid-term and a final exam. The exams will be based on the concepts, principles,
and computations covered in class and in the assigned readings and problems. Determination of
course grade will be based upon point accumulation from the following sources:
Case Reports
40 points possible
Case Presentations
20 points
Written exam
30 points
Class Participation
10 points
Total
100 points possible
Your course average is computed by dividing your total points earned (from homework and
exams) by the total points available. Your letter grade is determined based on the course average
score. The intended grade distribution is that about 35% of the students will receive an A or A-,
about 45% a B+, B or B-, and about 20% a C+ or less. Students close to a cutoff point may
receive subjective consideration based on their class participation. Please participate actively,
and ask questions whenever something is not clear.
APPROACH TO THE CASE STUDIES
Four cases are assigned and will be discussed in class. The cases describe real world situations and provide
the students with an opportunity to appreciate the extent to which the “theory” and “practice” interact in
reality. In general, students like the case studies but find the process of case analysis quite frustrating but
educating. The cases are not exercises. Frequently, there is no unique correct answer. What is important is
how one defines and addresses the problem. It is therefore essential that, as a student, you develop your own
thought in studying the cases and generate your own solution before meeting with the group. You will gain
more out the case studies by confronting your views with those of your team members during the case
preparations and by actively participating in the class discussions. Your contributions in the class
discussions are valuable and will immensely enrich your own learning experience and that of the entire
class. Always come in class prepared to participate actively in the discussions. You may be randomly
called upon to share your view.
The write-ups should be concise, and clearly and accurately communicate your solution to the issues raised
in the case. The cases will be graded based not only on the soundness of your arguments but also on the
clarity of your presentation. The body of write-ups must not exceed three (3) typed pages (based on 12point font, double-spaced, 1-inch margins all around) plus a cover page. You may attach annexes of tables,
computations, graphs or spreadsheets to support the main text.
The case studies are team projects and must be prepared in teams of at least three students but no more
than five students. Students must form their own teams. Members of the same group must submit only one
hard copy of their case write-ups with their names written on the cover page. You must keep a duplicate
copy of your write-up for your group. The write-ups must be turned in at the beginning of the class on the
due day. If none of your group member is unable to come to class to hand in your case write-up for
whatever reason, then please hand it in early to the instructor before the due date and time.
In addition to submitting a write-up, each team will be asked to make one case presentation and be
discussant on another case. The presentations should take approximately 15 minutes, and every team
member is expected to contribute.
During the case presentations, my role will be to facilitate discussion of cases and related material. I will
offer my views and may present a sample solution but I will not hand out my solution for the cases. As I
said earlier there is no unique solution and I don’t want to give the impression of undermining the analysis
carried out by you.
All the students will be required to submit at the end of the semester a peer evaluation of his or her team
members , each member assessing his or her own contribution as well as the contributions of the other team
member on a scale from 1 to 5, with 5 being the highest. Based on the team member evaluations, the team
work portions of a student’s grade will be adjusted accordingly.
ATTENDANCE POLICY
It is imperative that you attend every class. Missing classes will certainly have a negative impact
on your final grade. If you miss a class, it is your responsibility to keep up with materials that
were covered during your absence. You may be tested on ANY material covered in class and are
responsible for knowing that material regardless of whether you were in attendance. You will lose
5 points for each absence. Please prepare a name card and put it up in front of you during every
class.
Tentative Course Calendar
Case Studies in Corporate Finance
TENTATIVE CLASS SCHEDULE
Spring 2013
Week
#
Week
Starting
Monday
1
4-Mar-13
Topics
Part 1: Risk and Return
Course Introduction :Overview of Corporate Finance
Chap. 1
Risk and Return
Chap. 2 and 3
Bond and Stock Valuation
Chap. 4 and 5
Cost of Capital
Chap. 10
Case 1: Cost of Capital at Ameritrade
Harvard Business School Case
#9-201-046, Harvard College,
Revised 04/26/2001, 24 Pages
by Mark Mitchell and Erik Stafford, Harvard Business
2
11-Mar-13
Readings (BD)
Part 2: Corporate Investment Decision
Corporate Valuation: Valuation Model, Value-Based Management Chap. 11
Project Valuation: Cash Flow estimation, Capital Budgeting
Chap. 13
Capital Structure Decisions I: Business and Financial Risks,
Effects of Leverage on Firm Value, M&M Theory, Miller Models,
Hamada's Equation
Chap. 15
Case 2: American Chemical Corporation
by William E. Fruhan and John P. Goldsberry
3
18-Mar-13
Part 3: Corporation Financial Policy
Capital Structure Decisions II: Limit to the Use of Debt,
Financial Distress, Agency Cost, Asymmetric Information
Chap. 16
Payout Policy: Dividends and Share Repurchases
Chap. 17
Case 3: Dividend Policy at Linear Technology
Harvard Business School Case
#9-204-066, Harvard College,
Revised 02/11/2004,18 Pages.
by Malcolm P. Baker and Alison Berkley Wagonfeld
4
25-Mar-13
Harvard Business School Case
#9-280-102, Harvard College,
Revised 12/01/1995, 11 Pages
Part 4: Mergers and Acquisitions
Leveraged Buyouts, Merger Analysis (Cash Flow Valuation, Taxes,
Chap. 26
Captal Structure)
Case 4: Seagate Technology Buyout
by Gregor Andrade, Todd Pulvino and Stuart C. Gilson
FINAL EXAM
Harvard Business School Case
#9-201-063, Harvard College,
Revised 03/12/2002, 19 Pages