UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN
College of Business
Department of Finance
Finance 422: CASE STUDIES IN CORPORATE FINANCE
Spring 2013
Section N
Tuesday-Thursday, 9:30-10:50am
Section P
Tuesday-Thursday, 11:00am -12:20pm
2007 BIF
SYLLABUS
Instructor Information
Prof. Mark Vonnahme
Office: 331 Wohlers Hall
Office Hours: Tuesday, 3:00 - 5:00 pm; Wednesday, 1:00-3:00pm;
Or by appointment
Office Phone: 244-0350 Cell: 630-770-3642
Email: mvonnahm@illinois.edu
Textbooks and Course Materials
The following textbook is required for this course:
Case Studies in Finance: Managing for Corporate Value Creation, by Robert F.
Bruner, 6th Edition, McGraw-Hill Irwin, 2010
In addition to the above textbook, there will be other case materials provided from guest
speakers throughout the class and possibly from additional cases that we identify for
discussion during the semester. Materials will be provided as needed to support our class
analyses and discussion. 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.
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It is my expectation that students in the course have a good knowledge of the material
covered in FIN 221 and FIN 300 as well as ACCY 201. We will be introducing
additional background material during the semester in the form of handouts.
Your textbook from FIN 321 will represent a useful reference source for background
reading. . Recommended topical readings from a corporate finance 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 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 potential and hopefully best course of action
in a particular situation confronted by a business. This is truly Applied Finance in action.
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
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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.
You are strongly encouraged 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 Summaries
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 three and inform me of each team’s members by
February 1. 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
asked to rank your fellow team members in terms of their effort and
contribution to the case analysis.
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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 work with your team or 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.
There will be team based Case Summaries required on selective cases
throughout the semester. These summaries are expected to be two to three pages
in length. The format to be covered will include: A Description of the Problem or
Issues, the Analytics required and undertaken in evaluating the case including
interpretation of the analytics , and a Recommendation to Management, the Board
of Directors or others as may be indicated by the case.
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. All students will be required to prepare a
two page Executive Summary on the case discussed during any excused or
unexcused absence. The report will be due at the next class session.
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 7 – April 4 . 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. In addition you will be required to submit a Team
Analysis of the case in the format outlined. Thus, your participation in those
discussions will be graded as in any other class.
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Teams must select the case that they would like to present by February 9 . 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.
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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
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 from a Corporate Finance textbook is recommended in support of the case
discussion. As needed, additional relevant background material will be distributed in the form of class
notes.)
DATE
CASE ASSIGNMENT
TOPIC
Jan. 15
Jan. 17
BACKGROUND
READING
Course Introduction
FEDEX vs. UPS
Value creation and
economic profit
Financial Statement
Analysis
Jan. 22
Krispy Kreme
Doughnuts, Inc.
Financial statement
analysis
Financial Statement
Analysis
Jan. 24
Deutsche Brauerei
(part I)
Financial forecasting
and growth
Financial Statement
Analysis and
Financing Growth
Jan. 29
Deutsche Brauerei
(part II)
Financial forecasting
and growth
Financial Statement
Analysis and
Financing Growth
Jan. 31
The Boeing 7E7
Corporate capital costs
Case 13 from text
Submit Team Names
Feb. 5
Value Line Publishing
October 2002
Financial ratios and
forecasting
Case 12 from text
Feb. 7
Teletech Corporation,
2005
Business segments and
risk-return trade-offs
Case 15 from text
Feb. 12
AuroraTextile Company
Analysis of automation
investment
Case 20 from text
Feb. 14
Target Corporation
Multifaceted capital
investment decisions
Case 19 from text
Feb. 19
Purinex, Inc.
Financing
7
the
early
Case 30 from text
stage high growth firm
Feb. 21
Feb. 26-28
Mar. 5
Euroland Foods S.A.
Strategic Resource
Allocation
Case 24 from text
Initial public offering
for a
young firm
Case 28 from text
FIRST EXAM
JetBlue Airways IPO
Valuation
Mar 7
NO CLASS
.
Mar. 12
Gainesboro Machine
Tools Corporation
Dividend and stock
buyback decision
Case 26
Mar. 14
California Pizza Kitchen
Optimal leverage
Case 31 and 33
from text
Case 32 from text
Mar.17-Mar. 25th
Spring Break
Mar. 26
Deluxe Corporation
Financial
flexibility/strategic risk
Mar. 28
The Wm. Wrigley Jr.
Company
Leveraged
restructuring
Apr. 2
Flinder Valves and
Controls, Inc.
Valuing the enterprise
for sale
Case 41 and 43
Apr. 4
Arcadian Microarray
Technologies, Inc.
Evaluating terminal
values
Case 42 from text
Apr. 9
Apr. 11
TBA/Guest Speaker
.
Valuation/M&A
TBA/Guest Speaker
Valuation/M&A
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Case 34
Apr. 16
TBA.
Valuation/M&A
Apr. 18
TBA
Valuation/M&A/Private
Equity/Negotiation
Apr. 23
TBA/Guest Speaker
Valuation/Negotiation
Apr.25
TBA
Valuation/Negotiation
Apr. 30-May 12
Second Case Examination
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