UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN
College of Business
Department of Finance
Finance 422: CASE STUDIES IN CORPORATE FINANCE
Spring 2011
Section N
Tuesday-Thursday 9:30-10:50am
2007 BIF
SYLLABUS
Instructor Information
Prof. Mark Vonnahme
Office: 331 Wohlers Hall
Office Hours: Tuesday and Wednesday, 3:00 - 5:00 pm or by appointment
Office Phone: 244-0350 Cell: 630-770-3642
Email: mvonnahm@illinois.edu
Textbooks and Course Materials
I have assigned the following textbooks for this course:
1. Case Studies in Finance: Managing for Corporate Value Creation, by Robert F.
Bruner, 6th Edition, McGraw-Hill Irwin, 2010
2. Applied Corporate Finance: A User’s Manual, by Aswath Damodaran, 2nd
Edition, John Wiley, 2006
The first textbook is required while the second is strongly recommended. In addition to
the above textbooks, there will be other case materials provided from guest speakers
throughout the class. As the semester progresses our schedule may be adjusted based
upon availability of the executives that will provide both background and leadership on
selective case studies in risk management, insurance or other related financial topics.
Announcements will be made in class and via an email distribution list for the class.
Course Prerequisites and Background Materials
Students are expected to have completed FIN 221 and FIN 300 before enrolling in this
course. FIN 321 is a STRICT prerequisite and will be ENFORCED. Students who have
not completed FIN 321 will find themselves at a disadvantage given that this course does
not intend to teach corporate finance, but rather explore applications via case discussion.
I assume that students in the course have a good knowledge of the material covered in
FIN 221 and FIN 300. I will be introducing additional background material during the
semester in the form of handouts.
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In this course, I assume that you will be using your textbook from FIN 321 as a reference
source for background reading. An alternative source is the recommended textbook by
Damodaran. Recommended readings from that textbook related to the cases discussed in
each class can be found on the course schedule in the last two pages of the syllabus. If
you choose to use some other similar textbook, please refer to the background reading
area related to each case and look it up in that text’s table of contents. If you have any
questions, please feel free to check with me. Using a reference textbook is a very good
practice of how you will be working in your professional career.
Course Description
This course helps students to bridge the gap between the theory of finance, covered in
other courses, and the reality of decision-making as a financial manager through the use
of real-world case studies. Students learn to analyze real-world problems and provide
recommendations to upper management of the best course of action in a particular
situation confronted by a business.
Course Objectives
The narrow objective of this course is to help students develop self-learning skills,
writing skills, as well as encourage teamwork. The greater objective is to prepare students
for making decisions within a business environment, a very valuable skill when you
begin your career in the business world. To achieve these objectives, the course will use
the “case study” method of teaching and learning. Case studies present real-world,
complex problems faced by financial managers that require analysis and use of judgment
to reach important business decisions.
The use of case studies is a very effective learning method because it emphasizes student
self-learning rather than a passive absorption of knowledge. Students learn to develop
critical thinking skills and use their judgment to make decisions. Case studies do not
always lead to the “right” or the “one” course of action for the decision maker. Rather,
decisions are justified based upon sound financial assumptions and a thorough analysis of
the situation at hand. Therefore, the analysis and discussion of cases is very valuable
because it teaches students how to use principles of finance to define and analyze
problems, work as a member of a team, and make recommendations for the best course of
action.
Class Format
Case courses have a very different class format from other courses that you have taken
thus far in your studies. In other courses, students are engaged in a passive form of
learning and are expected to learn and practice skills through homework and exams.
Courses that utilize the “case study” method assume an active form of learning on the
part of students. The following four principles are ESSENTIAL components of each
student’s success in a case course:
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•
•
•
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Participation: Learning in a case course takes place primarily through active
class participation. Students are strongly encouraged and are responsible for
sharing their understanding and views on each case with the rest of the class. As
you can tell from the grade composition, class participation is very important
and comprises half of your course grade.
Preparation: To effectively participate in class discussion of cases, students
MUST come to class well prepared. Students should study each assigned case in
advance, identify the main participants and the problem faced, and prepare to ask
and answer questions. It is very important that you work to analyze the case
before it is discussed in class. You must be prepared to offer your judgment and
recommendation for the situation presented in each case. You should feel free to
visit me during office hours or set up an appointment, if you need help with
preparing for a case. In addition, you should read all assigned background
readings. Again, I emphasize that students must prepare well before arriving to
class.
Presence: The only way to learn and succeed in this course is to be present and
participate in each and every class. Reading a text or copying notes from your
fellow students CANNOT substitute for the insight and knowledge that you will
acquire through participation in class discussions.
Promptness: Students must make sure that they arrive before the beginning of
each class. Students who arrive to class late disrupt the discussion and impose a
burden on their fellow students’ learning experience. If, for some reason, you
happen to arrive to class late, please enter quietly and do not disturb your fellow
students.
It is clear from the above that students must make a commitment to prepare for each
class and actively participate in class discussions. This point cannot be emphasized
enough! Students must also be prepared to be called upon to answer questions or offer
their views on the case under discussion. I also strongly encourage you to take a stand
and offer your recommendation for action by management based upon your analysis.
Remember, case studies describe real-world business situations. There is typically more
than one course of action that can be taken. It is not important to discover which
particular action will eventually be taken as it is to learn to provide a recommendation
based on financial principles and solid analysis.
I strongly encourage you to read the section “Note to the Student: How to Study and
Discuss Cases” in the textbook “Cases in Finance: Managing for Corporate Value
Creation” by Robert F. Bruner (pages xxv-xxxi). Equally useful is the author’s note on
“Ethics in Finance” (pages xxxii-xlvii).
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Grading Procedures and Policies
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Course Grade: The course grade will be determined by your class participation,
two written case examinations, and a case presentation. The grade composition
is as follows:
Class Participation
Case Examinations
Case Presentation
45%
40%
15%
Case examinations: Each case examination will comprise 20% of your total grade.
These will be take-home examinations and the examination cases will be made
available in the Business Library at appropriate times during the semester, or in the
alternative through the Finance or MSF office. A completed case analysis shall be
no more than five double-spaced typewritten pages. Exhibits are not included in the
five-page limit. Students who speak English as their native language will have 7 (or
more) hours to complete the examination, beginning from the time they pick up the
case. Non-native English speakers will have 8 (or more) hours Detailed
instructions on how to take the case examinations will be discussed in class.
The Business Library’s hours for the spring 2011 semester are:
M-Th 8:30am-9pm
Fr 8:30am-5pm
Sa Closed
Su 1pm-9pm
Upon completing the case exam, students must print the following pledge on the
back of their case analysis: “On my honor as a University of Illinois student I have
neither given nor received unauthorized aid on this exam, and I have limited the
time spent on this case to seven (eight) hours”. Please print your name and date the
pledge was made and sign your name below the pledge, which affirms the credibility
of your pledge. Your name should NOT appear elsewhere on the paper. Please
do not miss other classes when you are writing the exam.
The first case examination will be taken on an individual basis. The second case
examination will be taken on a team basis with each team composed of four
students. If there aren’t enough students in the course for each team to have four
members, then I will facilitate the formation of teams as the situation develops. I
would like you to form teams of four and inform me of each team’s members by
February 3. In the second case examination, each team member will receive the
grade assigned to the submitted team report. In addition, each of you will be
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asked to rank your fellow team members in terms of their effort and
contribution to the case analysis.
Participation grades: The quality of your class participation will be graded each
day on a scale of zero to three points. Participation grades will be based on the
following criteria:
o 0 points: No participation or observations
o 1 point: Contributes relevant information or facts, asks critical questions
concerning the discussion in class, reading assignments and responses to
comments of classmates
o 2 points: Provides an interpretation of relevant information and/or facts
that is based on analysis and, in turn, advances the discussion to other
related topics
o 3 points: Provides contributions that leads the discussion to a
significantly higher level of thought; or presents an analysis and
interpretation of the relevant information that results in a solution to the
case
You are encouraged to work independently in preparing the case. However, it will
be very helpful to form a study group in order to discuss your analysis and
interpretation of each case, which will help you to more effectively prepare for
class.
Each student is permitted to have NO MORE THAN TWO excused absences
throughout the semester. Please notify me of your absence before the specific
date either in person or by email.
Case Presentation: In addition to working together on the second case
examination, each team will be asked to present one of the cases listed on the
syllabus. The purpose of this presentation is to enable you to practice your
presentation skills. This presentation should be treated as taking place in front of
the firm’s board of directors (or senior management). You will be asked to present
one of the cases covered during the period February 24 – April 7. Those of you
not presenting on a specific day will play the role of a member of the board of
directors (or senior manager) and are expected to participate through questions
and during the case discussion. Thus, your participation in those discussions will
be graded as in any other class.
Teams must select the case that they would like to present by February 10. More
information on the selection process will be provided later. Teams will prepare
their presentations in consultation with me. I will provide guidelines and
suggestions to help you with the preparation of your presentation.
•
Office Hours: My office hours are listed on the first page of the syllabus. These
hours are especially allocated for the benefit of the students in this course. Please
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feel free to come to my office without an appointment during these hours. If you
cannot stop by my office during these hours, please feel free to ask me for an
appointment for another time, either by talking to me after class or by sending
me an email. I also encourage you to come to my office hours with questions,
comments or suggestions related to the course that you might have.
Academic Integrity
From the University statement on your obligation to maintain academic integrity:
“If you engage in an act of academic dishonesty, you become liable to
severe disciplinary action. Such acts include cheating; falsification or
invention of any information or citation in an academic endeavor; helping
or attempting to help others commit academic infractions; plagiarism;
offering bribes, favors or threats; academic interference; computerrelated infractions; and failure to comply with such regulations”
Rule 33 of the Code of Policies and Regulations Applying to All Students gives complete
details of rules governing academic integrity for all students. Students are responsible for
knowing and abiding by these rules.
Disability Accommodation
To ensure that disability-related concerns are properly addressed from the beginning,
students with disabilities who require reasonable accommodations to participate in this
class are asked to see me as soon as possible.
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COURSE SCHEDULE
(Background reading material is from the textbook “Applied Corporate Finance” by Aswath Damodaran.
As needed, additional relevant background material will be distributed in the form of class notes.)
DATE
CASE ASSIGNMENT
Jan. 18
TOPIC
BACKGROUND
READING
Course Introduction
Jan. 20
FEDEX vs. UPS
Value creation and
economic profit
Ch. 2
Financial Statement
Analysis
Jan. 25
Krispy Kreme
Doughnuts, Inc.
Financial statement
analysis
Financial Statement
Analysis
Jan. 27
Deutsche Brauerei
(part I)
Financial
forecasting and
growth
Financial Statement
Analysis and
Financing Growth
Feb. 1
Deutsche Brauerei
(part II)
Financial
forecasting and
growth
Financial Statement
Analysis and
Financing Growth
Feb. 3
The Boeing 7E7
(part I)
Submit Team Names
Corporate capital
costs
Ch. 3, 4
Case 13 from text
Feb. 8
The Boeing 7E7
(part II)
Corporate capital
costs
Ch. 3, 4
Case 13 from text
Feb. 10
Teletech Corporation,
2005
Select Case to be
Presented
Business segments
and risk-return
trade-offs
Ch. 3,4
Feb. 14-21
First Case Examination
Feb. 22
Discuss First Case
Examination
Feb. 24
Target Corporation
Multifaceted capital
investment decisions
Ch. 5
Mar. 1
Victoria Chemicals (A)
Relevant cash flows
Ch. 5, 6
7
Mar. 3
Victoria Chemicals (B)
Mutually exclusive
investment
opportunities
Ch. 5, 6
Mar. 8
Euroland Foods S.A.
Strategic Resource
Allocation
Ch. 6
Mar. 10
JetBlue Airways IPO
Valuation
Initial public
offering for a
young firm
Ch. 7
Mar. 15
Purinex, Inc.
Financing the earlystage high-growth
firm
Ch. 7
Mar. 17
California Pizza Kitchen
Optimal leverage
Ch. 7, 8
Case 31 from text
March.19-March 26th
Spring Break
Mar. 29
Deluxe Corporation
Financial flexibility
Ch. 7, 8
Case 31 from text
Mar. 31
Gainesboro Machine
Tools
Dividend and stock
buyback decisions
Ch. 10, 11
Apr. 5
The Wm. Wrigley Jr.
Company
Leveraged
restructuring
Ch. 7, 8
Apr. 7
Flinder Valves and
Controls Inc.
Valuing the
enterprise for sale
Ch. 12
Case 41 from text
Apr. 12
TBA
ERM or other topic
Class Notes
Apr. 14
TBA
ERM or other topic
Class Notes
Apr. 19
Hostile Takeovers: A
Primer for the Decision
Maker
Contests for control
Apr. 21
April 25-May 2
General
Electric’s Evaluating
an
Proposed Acquisition of arbitrage position
Honeywell
Second Case
Examination
8
Case 48 from text
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