American Home Products is a company with virtually no debt. Students are asked to analyze the company's debt policy and make a recommendation to the CEO. It is likely that adding debt to the capital structure would create some value for shareholders; the CEO is firmly against borrowing.

A U.S. trucking company is considering using debt for the first time to acquire another company. The directors of the company are divided in their opinion of the likely impact of leverage on Continental Carriers' performance. Their differences must be reconciled and a decision reached about whether to issue new debt or equity to fund the acquisition. Students are introduced to the impact of leverage on performance variables such as profits, growt...

The Butler Lumber Co. is faced with a need for increased bank financing due to its rapid sales growth and low profitability. Students must determine the reasons for the rising bank borrowing, estimate the amount of borrowing needed, and assess the attractiveness of the loan to the bank. A rewritten version of an earlier case. Allows students to practice ratio analysis, financial forecasting, and evaluating financing alternatives.

Less than a year after Sealed Air embarked on a program to improve manufacturing efficiency and product quality, the company borrowed almost 90% of the market value of its common stock and paid it out as a special dividend to shareholders. Management purposefully and successfully used the leveraged recapitalization as a watershed event, creating a crisis that disrupted the status quo and promoted internal change, which included establishing a new...

Presents recommendations for hurdle rates of Marriott's divisions to select by discounting appropriate cash flows by the appropriate hurdle rate for each division.

A major U.K.-based multinational is reevaluating its leverage policy as it restructures its business. The treasury team models the tradeoffs between the benefits and costs of debt financing, using Monte Carlo simulation to estimate the savings from the interest tax shields and expected financial distress costs under several sets of leverage policies. The group treasurer (CFO) must decide whether and how the simulation results should be incorporat...

Seagate's equity value was just a fraction of the value of its minority stake in Veritas Software Corp., a software maker. The investor group had to decide how much to offer for the operating assets, as well as how to finance the transaction. Further complicating the analysis was the fact that, unlike in traditional buyout settings, the target company was in a highly cyclical, volatile, and capital--intensive industry.

LATAM, the leading aeronautical operator in Latin America, transports nearly 70 million passengers and almost 1000 tons of cargo to more than 150 destinations in 29 countries. Its fleet consists of 342 aircraft, and it serves six domestic markets: Argentina, Brazil, Chile, Colombia, Ecuador, and Peru, in addition to having international operations within the region and to the rest of the world. Its shares are traded in Santiago and New York in th...

LATAM, the leading aeronautical operator in Latin America, transports nearly 70 million passengers and almost 1000 tons of cargo to more than 150 destinations in 29 countries. Its fleet consists of 342 aircraft, and it serves six domestic markets: Argentina, Brazil, Chile, Colombia, Ecuador, and Peru, in addition to having international operations within the region and to the rest of the world. Its shares are traded in Santiago and New York in th...

UST, Inc. is a very profitable smokeless tobacco firm with low debt compared to other firms in the tobacco industry. The setting for the case is UST's recent decision to substantially alter its debt policy by borrowing $1 billion to finance its stock repurchase program.