'Fin 4413\r'

' pay 725Spring 2006 J. E. Hodder comp any Finance Course Schedule Tuesday, January 17: base thorium, January 19:Clarkson Lumber graduate(prenominal) society yarn: subscriber line on fiscal compend a. How is the companys pecuniary doing? ( bear witness  flummox aside monetary ratios. ) b. wherefore has Clarkson Lumber borrowed increase amounts condescension its concordant masterfit dexterity? c. How has Mr. Clarkson met the funding engages of the company during the period 1993 with and through 1995? Has the monetary strength of Clarkson Lumber alter or deterio roamd? d. How attractive is it to present backup discounts?Tuesday, January 24:Clarkson Lumber Company (continued) interlingual rendition: a. set on Financial divination b. Note on Bank Loans a. How over more(prenominal)(prenominal) of a bring depart Mr. Clarkson need to pay the expected refinement in gross revenue to $5. 5 million in 1996 and to take every last(predicate) the trade discount s? (Prep ar a proposeed income story for 1996 and a pro forma counterbalance sheet as of declination 31, 1996. ) b. As Mr. Clarkson’s monetary adviser, would you urge him to go ahead with, or to re film, his pass judgment expansion and plans for additional debt funding? . As the intruster, would you respect Mr. Clarkson’s impart pick up; and if so, what conditions would you ordinate on the impart? Thursday, January 26:SureCut shear, Inc. a. treasure SureCut’s financial writ of execution victimisation standard ratios. b. why clear’t SureCut repay it’s contribute on eon? In addressing this question, you may pick up it service commensu wander-bodied to construct a â€Å"sources and pulmonary tuberculosiss” statement for the period June 30, 1995 †skirt 31, 1996. Tuesday, January 31:SureCut Shears (continued) a. What actions would you recommend that SureCut take in place to address its financial problems? If Mr.St ewart defys to a impart extension and your recommendations atomic number 18 implemented, when go out SureCut be able to repay the loan in full? b. Would you, as Mr. Stewart, agree to a loan extension? What conditions or term would you require? c. equalize the temper of the financial problems facing SureCut with those of Clarkson Lumber. Thursday, February 2: advanced(a) Technologies, Inc. expression entree #1 collectable a. In a volatile application such(prenominal)(prenominal)(prenominal) as semiconductor equipment manufacturing, how exampleful is long-term financial cooking? b. What argon the profound characteristics of ATIs trades and operating policies?How do these characteristics bow the companys financial organize? c. Has Mr. Michaels done a veracious job of financial planning? What set of possible conditions would place ATI on a lower floor the sterling(prenominal) finance embrace, and how great would that pressure be? d. Should ATI give away beaute ousness in 1998, thereby bringing its financial structure more in line with those of its principal(prenominal) competitors? Tuesday, February 7:Continental Carriers, Inc. a. How is the companys financial performance? (Examine  catch financial ratios. ) b. Given the personality of CCI’s trading, how more than debt can it give? . What argon the respective address of the unlike backing alternatives suggested? Thursday, February 9:Continental Carriers (continued) a. What data does the EBIT chart (Exhibit 3) provide? What inferences can we view from it? b. What argon the qualitative advantages and disadvantages of to each one of the forms of financing beneath consideration? c. How should the acquisition of inland weight be financed, taking into grudge the univocal termss of the divergent alternatives as closely as anformer(a)(prenominal) pertinent considerations? Tuesday, February 14:Debt Policy at UST Inc . a.From the eyeshot of a bondholder, what atom ic number 18 the primary attributes and business risks for UST? b. wherefore is UST considering a leveraged re crackingization after such a long history of traditionalist debt constitution? c. guess the incremental movement on UST’s apprize if the completed $1 billion recapitalization is implemented at a time (January 1, 1999). admit a 38% task dictate and perpetual debt. Also analyze, via a pro forma income statement, whether UST will be able to charter interest payments. d. Would UST be break down false with a different sign debt take? Should it adjust the debt level through time? e.Will the recapitalization hamper UST’s ability to get its long history of dividend payments? Thursday, February 16:No Class Meeting A â€Å" even off” session is tentatively schedule for 7:00 PM on Thursday February 2nd. The event will be a instruct review of Capital anatomical structure Theory. Tuesday, February 21: play off Container participation (A) a. Comp be Roger Sshort tone’s offshoot and financial st posegies with those of his predecessors. b. Examine the sensitivity of cavity Container’s meshing and notes lam to the piece of music and liner jury monetary value cycle. Assume gross sales flock of 7. 5 million tons per course and a 35% marginal revenue enhancement rate.What would be the effect of a $50 per ton price increase? Is such an industry-wide price increase plausible? c. What should be stone Container’s financial priorities in 1993? d. Of the financing alternatives described in the case, which would be in the best interests of Stone’s sh arholders? Which would be in the best interests of its high-yield debt holders? Which would be happy by its bank creditors? Thursday, February 23:Stone Container conjunction (continued) skid Submission #2 receivable Tuesday, February 28:. innovate oil flowerpot a.Does Pioneer end its boilersuit corporate weighted second-rate apostrophize of capital correctly? b. When evaluating projects and allocating investiture specie among divisions, should Pioneer drop a virtuoso corporate damage of capital or multiple divisional bank vault rank? If multiple range ar used, how should they be determined? c. Should all projects deep down a single division use the homogeneous bank vault rate? If not, how should different standards be determined? Thursday, butt against 2:Marriott plenty: The Cost of Capital (Abridged) a. are the quadruple components of Marriotts financial scheme consistent with its ripening objective? b.Why does Marriott use divisional burial vault rates preferably of each a company-wide rate or project-specific rates? c. foretell the WACC for Marriott as a whole. What unhazardous rate and risk premium did you use in estimating the cost of loveliness? How did you step the firms cost of debt? Tuesday, abut 7:Marriott Corporation (continued) a. Estimate the cost of equity, cost of debt, and WACC for Marriotts caparison and its eating place divisions. b. What is the cost of capital for Marriotts pact work division? How can you visualize that divisions equity costs without publicly traded alike(p) companies?Thursday, defect 9:Pressco, Inc. (1985) a. What is the Net extradite esteem (NPV) of the mechanical drying equipment investment hazard (as of declination 1985) expect a 12% cost of capital for Paperco? Assume the rumored naked revenue proposal is not enacted and the in the raw equipment is installed in December 1986. b. What is the NPV of the investment project assuming that the newly tax proposals are enacted, the new drying equipment is installed in December 1986, and Paperco signs a bind purchase contract before long decorous to be eligible for the 8% enthronization Tax Credit and the use of ACRS dispraise? . Ms. Rogers knows that Papercos counsel incorporated a 6% general puffiness hypothesis into its general cost of capital bet. She as w ell as knows Papercos management felt that fuel costs would retain un adjustmentd through 1990 and therefore come on at 6% per twelvemonth thereafter. How much, if at all, would the use of this information change the projects NPV imagine? Spring Break Tuesday, expose 21:. E. I. du Pont de Nemours and Co. : titanium Dioxide a. What are Du Ponts war-ridden advantages in the Titanium Dioxide commercialize as of 1972? How immutable or defensible are they?What moldiness Du Pont do to retain its warlike advantages in the next? b. Given the forecasts provided in the case, estimate the incremental cash flows associated with Du Ponts growth dodging and its maintain strategy for the Titanium Dioxide market. How much risk and uncertainty dodge these future cash flows? c. How might competitors act to Du Ponts filling of either strategy? What early(a) factors should Du Pont consider in making this decision? Which strategy do you recommend? Thursday, March 23:. Wilmington Tap and authorize a. ar the fanfare laying claims used in the cash flow projections onsistent with the implicit inflation assumption in a 20% hurdle rate? b. Critically evaluate the sales forecasts for Wilmington, its competitors, and the market as a whole. Why does demonstrate 7 indicate a declining market share for Wilmington? Why are another(prenominal) competitors growing more speedily than Wilmington? c. Is it comely to assume that the competition will not purchase new engineering grinders (either Icahn or one of the apparent German alternatives)? If instead you assume that Wilmingtons competitors purchase new-fashioned grinders, how should the sales forecast be modified? d.What are possible implications of the higher look taps produced on the Icahn (or similar) machines for unit sales projections and possible pricing differentials? e. Are there other aspects of the cash flow estimates which should be questioned? Tuesday, March 28:Wilmington Tap and Die (Continued) referen ce Submission #3 collectible Thursday, March 30:Interco a. Assess Intercos financial performance. Why is the company a coup seat? b. As a fragment of Intercos come on are you persuaded by the premiums remunerative psycho compendium ( salute 10) and the comparable transactions analysis (exhibit 11)? c.How does Wasserstein Perellas estimated e military rank range of $68 †$80 per commonality share for Interco result from the assumptions in exhibit 12? As a element of Intercos board, which of those assumptions would you have questioned? d. How would you advise the Interco board on the $70 per share supply? Tuesday, April 4:Bougainville Power Station indicant:Brealey & Myers, Chapter 19 OR Ross, Westerfield, & Jaffe, Chapter 17 a. What are the set of loan subsidies on the side and Japanese conspires? b. What are the Present determine for the evoke Tax Shields on each bid? . Is 100% debt optimal for the business office displace equipment purchase? If not, how should the bid military ranks be familiarised? d. What is the appropriate discount rate for evaluating the keister Case NPV? Thursday, April 6:Southport Minerals Inc. a. What are the pros and cons of the approaches suggested in the case for evaluating the Firstburg Project? What are the advantages of APV compared with the approaches in the case? b. How would you estimate an unlevered cost of equity for this project? c. How should anticipated inflation be incorporated in the project evaluation? . Are there any assumptions regarding communicate cash flows or loan repayments that you olfactory sensation are either besides approving or overly bearish? Tuesday, April 11:Southport Minerals (continued) Case Submission #4 out-of-pocket Thursday, April 13: pick price and significant preferences I Reading:Brealey & Myers, Chapters 20-22 OR Ross, Westerfield, & Jaffe, Chapters 22 and 23 Tuesday, April 18:Option determine and Real Options II Thursday, April 20:Option Pr icing and Real Options tercet Tuesday, April 25:Wire Tel a.Estimate the value of the archetypal- division contemporaries output using APV. How much of that value is due to financing with the secured bank loan? b. What is the effect of the being able to sell the manufacturing equipment for $4 million in year three if demand for the first coevals phones is low? c. What must be the nominal value of the growth resource stand for by the second coevals product in order to relinquish showtime Wire Tel? Thursday, April 27:MW crude oil Corporation (A) a. Is it reasonable to expect that the MW properties are more valuable to Apache than to Amoco?What sources of value almost in all probability account for the difference surrounded by buyer and seller? b. Value all the MW reserves using APV. Is your estimate more in all likelihood to be diagonaled high or low? What are the sources of bias? c. How would you structure an analysis of MW as a portfolio of assets-in-place and sele ctions? d. counseling on proved unexploited reserves, what is the conduct price for the embedded option? What are the current asset value, volatility, and other remark parameters needed for an option valuation? Tuesday, whitethorn 2:MW Petroleum Corporation (continued) Case Submission #5 Due Thursday, may 4:Course reexamine\r\nFin 4413\r\nFinance 725Spring 2006 J. E. Hodder Corporation Finance Course Schedule Tuesday, January 17:Introduction Thursday, January 19:Clarkson Lumber Company Reading:Note on Financial Analysis a. How is the companys financial performance? (Examine appropriate financial ratios. ) b. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? c. How has Mr. Clarkson met the financing inescapably of the company during the period 1993 through 1995? Has the financial strength of Clarkson Lumber improved or deteriorated? d. How attractive is it to take trade discounts?Tuesday, January 24:Clarkson Lumber Company (continued) Reading: a. Note on Financial Forecasting b. Note on Bank Loans a. How much of a loan will Mr. Clarkson need to finance the expected expansion in sales to $5. 5 million in 1996 and to take all the trade discounts? (Prepare a intercommunicate income statement for 1996 and a pro forma balance sheet as of December 31, 1996. ) b. As Mr. Clarkson’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and plans for additional debt financing? . As the banker, would you approve Mr. Clarkson’s loan request; and if so, what conditions would you put on the loan? Thursday, January 26:SureCut Shears, Inc. a. Evaluate SureCut’s financial performance using standard ratios. b. Why can’t SureCut repay it’s loan on time? In addressing this question, you may find it useful to construct a â€Å"sources and uses” statement for the period June 30, 1995 †March 31, 1996. Tuesday, January 31:SureCut Shears (contin ued) a. What actions would you recommend that SureCut take in order to address its financial problems? If Mr.Stewart agrees to a loan extension and your recommendations are implemented, when will SureCut be able to repay the loan in full? b. Would you, as Mr. Stewart, agree to a loan extension? What conditions or terms would you require? c. Compare the nature of the financial problems facing SureCut with those of Clarkson Lumber. Thursday, February 2:Advanced Technologies, Inc. Case Submission #1 Due a. In a volatile industry such as semiconductor equipment manufacturing, how useful is long-term financial planning? b. What are the key characteristics of ATIs markets and operating policies?How do these characteristics influence the companys financial structure? c. Has Mr. Michaels done a good job of financial planning? What set of possible conditions would place ATI under the greatest financing pressure, and how great would that pressure be? d. Should ATI sell equity in 1998, thereby bringing its financial structure more in line with those of its main competitors? Tuesday, February 7:Continental Carriers, Inc. a. How is the companys financial performance? (Examine appropriate financial ratios. ) b. Given the nature of CCI’s business, how much debt can it support? . What are the respective costs of the different financing alternatives suggested? Thursday, February 9:Continental Carriers (continued) a. What information does the EBIT chart (Exhibit 3) provide? What inferences can we draw from it? b. What are the qualitative advantages and disadvantages of each of the forms of financing under consideration? c. How should the acquisition of Midland Freight be financed, taking into account the explicit costs of the different alternatives as well as other relevant considerations? Tuesday, February 14:Debt Policy at UST Inc . a.From the perspective of a bondholder, what are the primary attributes and business risks for UST? b. Why is UST considering a leverag ed recapitalization after such a long history of conservative debt policy? c. Estimate the incremental effect on UST’s value if the entire $1 billion recapitalization is implemented immediately (January 1, 1999). Assume a 38% tax rate and perpetual debt. Also analyze, via a pro forma income statement, whether UST will be able to make interest payments. d. Would UST be better off with a different initial debt level? Should it adjust the debt level through time? e.Will the recapitalization hamper UST’s ability to maintain its long history of dividend payments? Thursday, February 16:No Class Meeting A â€Å"make-up” session is tentatively scheduled for 7:00 PM on Thursday February 2nd. The topic will be a brief review of Capital Structure Theory. Tuesday, February 21:Stone Container Corporation (A) a. Compare Roger Stone’s growth and financial strategies with those of his predecessors. b. Examine the sensitivity of Stone Container’s earnings and cash flow to the paper and linerboard pricing cycle. Assume sales volume of 7. 5 million tons per year and a 35% marginal tax rate.What would be the effect of a $50 per ton price increase? Is such an industry-wide price increase plausible? c. What should be Stone Container’s financial priorities in 1993? d. Of the financing alternatives described in the case, which would be in the best interests of Stone’s shareholders? Which would be in the best interests of its high-yield debt holders? Which would be favored by its bank creditors? Thursday, February 23:Stone Container Corporation (continued) Case Submission #2 Due Tuesday, February 28:. Pioneer Petroleum Corporation a.Does Pioneer estimate its overall corporate weighted average cost of capital correctly? b. When evaluating projects and allocating investment funds among divisions, should Pioneer use a single corporate cost of capital or multiple divisional hurdle rates? If multiple rates are used, how should they be determ ined? c. Should all projects within a single division use the same hurdle rate? If not, how should different standards be determined? Thursday, March 2:Marriott Corporation: The Cost of Capital (Abridged) a. Are the four components of Marriotts financial strategy consistent with its growth objective? b.Why does Marriott use divisional hurdle rates instead of either a company-wide rate or project-specific rates? c. Estimate the WACC for Marriott as a whole. What risk-free rate and risk premium did you use in estimating the cost of equity? How did you measure the firms cost of debt? Tuesday, March 7:Marriott Corporation (continued) a. Estimate the cost of equity, cost of debt, and WACC for Marriotts lodging and its restaurant divisions. b. What is the cost of capital for Marriotts contract services division? How can you estimate that divisions equity costs without publicly traded comparable companies?Thursday, March 9:Pressco, Inc. (1985) a. What is the Net Present Value (NPV) of the mechanical drying equipment investment opportunity (as of December 1985) assuming a 12% cost of capital for Paperco? Assume the rumored new tax proposal is not enacted and the new equipment is installed in December 1986. b. What is the NPV of the investment project assuming that the new tax proposals are enacted, the new drying equipment is installed in December 1986, and Paperco signs a binding purchase contract soon enough to be eligible for the 8% Investment Tax Credit and the use of ACRS depreciation? . Ms. Rogers knows that Papercos management incorporated a 6% general inflation assumption into its overall cost of capital estimate. She also knows Papercos management felt that fuel costs would remain unchanged through 1990 and then rise at 6% per year thereafter. How much, if at all, would the use of this information change the projects NPV estimate? Spring Break Tuesday, March 21:. E. I. du Pont de Nemours and Co. : Titanium Dioxide a. What are Du Ponts competitive advantages i n the Titanium Dioxide market as of 1972? How permanent or defensible are they?What must Du Pont do to retain its competitive advantages in the future? b. Given the forecasts provided in the case, estimate the incremental cash flows associated with Du Ponts growth strategy and its maintain strategy for the Titanium Dioxide market. How much risk and uncertainty surround these future cash flows? c. How might competitors respond to Du Ponts choice of either strategy? What other factors should Du Pont consider in making this decision? Which strategy do you recommend? Thursday, March 23:. Wilmington Tap and Die a. Are the inflation assumptions used in the cash flow projections onsistent with the implicit inflation assumption in a 20% hurdle rate? b. Critically evaluate the sales forecasts for Wilmington, its competitors, and the market as a whole. Why does exhibit 7 indicate a declining market share for Wilmington? Why are other competitors growing more rapidly than Wilmington? c. Is it reasonable to assume that the competition will not purchase new technology grinders (either Icahn or one of the apparent German alternatives)? If instead you assume that Wilmingtons competitors purchase modern grinders, how should the sales forecast be modified? d.What are possible implications of the higher quality taps produced on the Icahn (or similar) machines for unit sales projections and possible pricing differentials? e. Are there other aspects of the cash flow estimates which should be questioned? Tuesday, March 28:Wilmington Tap and Die (Continued) Case Submission #3 Due Thursday, March 30:Interco a. Assess Intercos financial performance. Why is the company a takeover target? b. As a member of Intercos board are you persuaded by the premiums paid analysis (exhibit 10) and the comparable transactions analysis (exhibit 11)? c.How does Wasserstein Perellas estimated valuation range of $68 †$80 per common share for Interco result from the assumptions in exhibit 12? As a m ember of Intercos board, which of those assumptions would you have questioned? d. How would you advise the Interco board on the $70 per share offer? Tuesday, April 4:Bougainville Power Station Reading:Brealey & Myers, Chapter 19 OR Ross, Westerfield, & Jaffe, Chapter 17 a. What are the values of loan subsidies on the English and Japanese bids? b. What are the Present Values for the Interest Tax Shields on each bid? . Is 100% debt optimal for the power station equipment purchase? If not, how should the bid evaluations be adjusted? d. What is the appropriate discount rate for evaluating the Base Case NPV? Thursday, April 6:Southport Minerals Inc. a. What are the pros and cons of the approaches suggested in the case for evaluating the Firstburg Project? What are the advantages of APV compared with the approaches in the case? b. How would you estimate an unlevered cost of equity for this project? c. How should anticipated inflation be incorporated in the project evaluation? . Are there any assumptions regarding projected cash flows or loan repayments that you feel are either overly optimistic or overly pessimistic? Tuesday, April 11:Southport Minerals (continued) Case Submission #4 Due Thursday, April 13:Option Pricing and Real Options I Reading:Brealey & Myers, Chapters 20-22 OR Ross, Westerfield, & Jaffe, Chapters 22 and 23 Tuesday, April 18:Option Pricing and Real Options II Thursday, April 20:Option Pricing and Real Options III Tuesday, April 25:Wire Tel a.Estimate the value of the first generation product using APV. How much of that value is due to financing with the secured bank loan? b. What is the effect of the being able to sell the manufacturing equipment for $4 million in year three if demand for the first generation phones is low? c. What must be the minimum value of the growth option represented by the second generation product in order to justify starting Wire Tel? Thursday, April 27:MW Petroleum Corporation (A) a. Is it reasonabl e to expect that the MW properties are more valuable to Apache than to Amoco?What sources of value most plausibly account for the difference between buyer and seller? b. Value all the MW reserves using APV. Is your estimate more likely to be biased high or low? What are the sources of bias? c. How would you structure an analysis of MW as a portfolio of assets-in-place and options? d. Focusing on proved undeveloped reserves, what is the strike price for the embedded option? What are the current asset value, volatility, and other input parameters needed for an option valuation? Tuesday, May 2:MW Petroleum Corporation (continued) Case Submission #5 Due Thursday, May 4:Course Review\r\n'