After five months of a fairly relaxed work schedule, Katzu Mizuno found himself wrapped up in an intense analysis. A first-year associate at Lynch Investments, Mizuno had received a morning phone call in February 1996. The caller was his boss, Anna Curti. The subject was a long-time customer, MCI. In contrast to the booming stock market, the performance of MCI’s share price had been underwhelming. The board of directors had recently discussed rep...

A growing folding carton company is contemplating the replacement of an old machine with a new one. The case challenge is to develop a cash flow forecast and determine the proper discount rate for the machine replacement. In addition to increased capacity and reduced waste, the new machine offers strategic advantages to the firm in its chosen market niche. Issues related to operations are central to appreciating the importance and implications of...

Given recent changes in market conditions and ongoing market uncertainty, an internal financial analyst at Heinz must estimate the company's weighted average cost of capital (WACC). Data for both Heinz and comparable firms are provided. The case provides

This note provides an introduction to the standard approaches used to value businesses from the perspective of the investor (e.g., discounted cash flow, market multiples). Each approach is illustrated with a specific practical application. The note provides an in-depth example of discounted cash flow valuation of a firm including cash flow forecasting, terminal value estimation, and cost of capital determination. To focus the analysis, the note d...

Which discount rate should a company use to evaluate its projects or to value its assets in general? This note is intended to clarify the different assumptions and formulas used to calculate the WACC that students may encounter in different textbooks and articles.

This case is used in Darden's core first year finance course. The exercise introduces in a fun way the fundamentals of financial policy that are the foundation of corporate finance. It takes the textbook treatment of the Modigliani and Miller (M&M) principles and casts it in a case format. The case is accompanied by a teaching note for instructors and spreadsheets for both instructors and students. Moe Miller, the new managing director of M&M Piz...

After a period of poor stock-market performance, conglomerate Chestnut Foods (Chestnut) faces the acquisition of its stock by an activist investor. The new investor demands the sale of Chestnut’s high-growth division, which contrasts with the CFO’s turnaround plan to expand this same division. To disentangle the way forward for Chestnut, students are invited to grapple with the risk-adjusted performance of each division and the estimation of divi...

Jeju Air is a market leader in the South Korean low-cost carrier industry, operating more than 20 domestic and international air routes in Asian countries. In the midst of rising economic activity and the opening of more air routes in North Asia, Jeju Air is planning an initial public offering to seek capital to grow its China business.Meanwhile, Singapore Airlines is in discussions to purchase a 20 per cent equity investment in Jeju Air. Is this...

This case allows students to learn the principles of capital budgeting in a global context. It features a power company in Brazil that is a subsidiary of AES Corporation. A new-to-the-firm manager is assigned his first big project: to evaluate and defend the case for investing in a 500 MW thermal power plant. He must present his findings to the Global Valuation Review team, including a recommendation for the project and a bid price for the upcomi...

Jumbo Group Ltd. (Jumbo) was among Singapore’s leading food and beverage establishments. Founded in 1987, the group consisted of eight brands and operated 16 outlets—14 in Singapore and two in China. On October 28, 2015, Jumbo announced its initial public offering (IPO) of SG$22.06 million, consisting of two million retail shares and 86.23 million placement shares at SG$0.25 each. In this highly competitive market, the company’s chief executive o...