Suggested Format for Case Analyses:
1. Executive Summary: brief 1 paragraph stating key problem(s) and your main
recommendation(s)/decision(s).
2. Problem Identification: 1-2 page write-up of the key problem(s) you have identified
within the case. This should not be a re-hash of the case itself. The Case Study questions
should help you address the issues in this section.
3. Action Plan: 1-2 page write-up of your proposed solution to the problem(s) with
detailed steps as to how to proceed with implementing your proposal.
4. Financial Analysis: 1-2 page write-up of the financial analysis that supports the
recommendation(s) you have presented in the Executive Summary and Action Plan. Use
an electronic spreadsheet to do the calculations and print out these figures as an
attachment to your case analysis.
Note: Case Analyses-in-brief and Case Summaries should follow the same format as
above but should be much briefer than a complete Case Analysis.
Case Study Questions:
Hampton Machine Tool Company:
1. Why can’t a profitable firm like Hampton repay its loan on time and why does it
need more bank financing? What major developments between November 1978
and August 1979 contributed to this situation?
2. Prepare a pro forma income statement and balance sheet for the four months
September through December, 1979. How do these projections support your
answer to question 1 above?
3. Critically evaluate the assumptions on which your forecasts are based. What
developments could alter your results? Is Mr. Cowins correct in his belief that
Hampton can repay the loan in December?
4. What action should Mr. Eckwood take on Mr. Cowins’ loan request? What are
the major risks associated with the proposed loan?
Investment Analysis and Lockheed Tri Star:
1. Answer all parts of four of the five questions presented in the case using an
electronic spreadsheet (i.e., do questions 1, 2, 4, and 5, while skipping 3).
2. For the Lockheed Tri Star question (#5), what are the key risks that can greatly
affect your investment decision?
E.I. du Pont de Nemours and Company: Titanium Dioxide:
1. What are Du Pont’s competitive advantages in the TiO2 market as of 1972? How
permanent or defensible are they? What must Du Pont do to retain its competitive
advantages in the future?
2. Given the forecasts provided in the case, estimate the expected incremental free
cash flows associated with Du Pont’s “growth” strategy and “maintain” strategy
for the TiO2 market. How much risk surrounds these future cash flows?
3. Based on your analysis, which strategy should Du Pont pursue? Note that in
1972, bond yields and the inflation rate were approximately:
a. Long-term Treasuries = 6.2%
b. AAA corporate bonds = 7.2%
c. BBB corporate bonds = 7.8%
d. Inflation rate (CPI) = 3.2%
Arundel Partners:
1. First, read the HBS Tutorial, “Capital Projects as Real Options: An Introduction,”
and then read the Arundel case to answer these and the following questions: Why
do the principals of Arundel Partners think they can make money buying movie
sequel rights? Why do the partners want to buy a portfolio of rights in advance
rather than negotiating film-by-film to buy them?
2. Estimate the per-film value of a portfolio of sequel rights such as Arundel
proposes to buy. [There are several ways to approach this problem, all of which
require some part of the data set in Exhibits 6-9. You may find it helpful to
consult the Appendix, which explains how these figures were prepared.] You can
use either DCF, real options, or both valuation techniques to answer this question.
3. What are the primary advantages and disadvantages of the approach you took to
valuing the rights? What further assistance or data would you require to refine
your estimate of the rights’ value?
Cox Communications, Inc., 1999:
1. Why is Cox Communications (CCI) acquiring Gannett? Given the proposed $2.7
billion purchase price, at what assumed terminal growth rate does the acquisition
make sense?
2. Assuming that the Gannett acquisition goes through, estimate Cox’s short-term
(1.5 years) and long-term (4.5 years) funding needs. How much of each funding
need must be met through external financing?
3. What key constraints does Mr. Clement face in satisfying Cox’s funding needs?
You may assume that the parent of CCI (i.e., Cox Enterprises, CEI) has mandated
a 65% floor on their economic stake.
4. Which solution in Exhibit 8 seems to satisfy the financing constraints determined
above and why?
Sealed Air Corporation:
1. Why did Sealed Air undertake a leveraged recapitalization? Do you think that it
was a good idea? For whom?
2. Given the movement in the company’s stock price after the leveraged recap’s
announcement, how much market value was created? Where did it come from?
3. Is pursuing a program of manufacturing excellence such as World Class
Manufacturing inconsistent with “levering up”?
4. Why did Dermot Dunphy, the CEO, feel it was necessary to change the
company’s priorities and incentive structure following the recapitalization?
Cephalon, Inc.:
1. How much business and financial risk does Cephalon face? How do these risks
relate to each other? What factors might mitigate some of these risks?
2. Using the Black-Scholes option pricing model, is SBC’s option priced fairly for
Cephalon?
3. How should Cephalon finance its projected cash needs to maximize shareholder
value?
Riverbend Telephone Company:
1. What will be the cash cost of either: (a) buying the truck; or (b) leasing the truck
this year and in each year that the truck is in use in the maintenance fleet of RTC?
2. Based on your analysis in question 1, what would you recommend the firm to do?
3. What are the key assumptions and risks underlying your recommendation?
Hanson Ski Products:
1. Answer all four questions presented on p.4 of the case.
2. Also, answer the following question: how would you characterize Hanson’s
working capital management policy (e.g., relaxed or restricted)?