Course Questions
------------------------------------------------- FI 627: Corporate Finance: Applications and advanced topics
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Study questions for case studies: Spring 2013
Week 1: Sears, Roebuck & Co. vs. Wal-Mart Stores, Inc. 1. How do the retailing strategies of Sears and Wal-Mart differ? 2. Wal-Mart’s average return on equity for the 1997 fiscal year was 19.7% while Sears’ average return on equity over roughly the same period was 22.0%. Don Edwards was puzzled by these numbers because of Wal-Mart’s reputation as a premier retailer and Sears’ financial difficulties not long ago. What is driving the performance of these two companies during fiscal 1997? 3. What ratios are most important in assessing current and predicting future value creation for Sears? For Wal-Mart?
Week 2: Valuing Rajat Bhatia’s Business Plan 1. Estimate (i) the current market value of the firm’s debt, (ii) the current market value of the firm using the free cash flow to equity, and (iii) the current market value of the firm using the free cash flow to the firm.
Week 3: Deutsche Brauerei 1. What accounts for Deutsche Brauerei’s rapid growth in recent years? Specifically, what policy choices account for this success? 2. What is Deutsche Brauerei’s credit policy toward its distributors in Ukraine? Why is it different from the policy toward its other distributors? Is the company’s credit policy appropriate? Is it profitable? If not, how would you change it? If so, what arguments would you offer to the board of directors in its defense? 3. Why does this profitable firm need increasing amounts of bank debt? 4. As a member of the board of directors, how would you vote on: a. The proposed raise for Oleg Pinchuk? b. The quarterly dividend declaration of €698,000? c. Adoption of the financial plan for 2001?
Week 4: NetFlix.com, Inc. 1.
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Study questions for case studies: Spring 2013
Week 1: Sears, Roebuck & Co. vs. Wal-Mart Stores, Inc. 1. How do the retailing strategies of Sears and Wal-Mart differ? 2. Wal-Mart’s average return on equity for the 1997 fiscal year was 19.7% while Sears’ average return on equity over roughly the same period was 22.0%. Don Edwards was puzzled by these numbers because of Wal-Mart’s reputation as a premier retailer and Sears’ financial difficulties not long ago. What is driving the performance of these two companies during fiscal 1997? 3. What ratios are most important in assessing current and predicting future value creation for Sears? For Wal-Mart?
Week 2: Valuing Rajat Bhatia’s Business Plan 1. Estimate (i) the current market value of the firm’s debt, (ii) the current market value of the firm using the free cash flow to equity, and (iii) the current market value of the firm using the free cash flow to the firm.
Week 3: Deutsche Brauerei 1. What accounts for Deutsche Brauerei’s rapid growth in recent years? Specifically, what policy choices account for this success? 2. What is Deutsche Brauerei’s credit policy toward its distributors in Ukraine? Why is it different from the policy toward its other distributors? Is the company’s credit policy appropriate? Is it profitable? If not, how would you change it? If so, what arguments would you offer to the board of directors in its defense? 3. Why does this profitable firm need increasing amounts of bank debt? 4. As a member of the board of directors, how would you vote on: a. The proposed raise for Oleg Pinchuk? b. The quarterly dividend declaration of €698,000? c. Adoption of the financial plan for 2001?
Week 4: NetFlix.com, Inc. 1.