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Conroy, Robert M.

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943-945 Warren Road

This case, intended for MBA and executive education audiences, investigates whether an LLC should invest in a real estate deal. The materials provide a straightforward opportunity for applying discounted-cash-flow methods from the perspective of equity investors in the LLC. The investors know the terms of interest and principal payments on planned debt financing and have made forecasts of rental r ...

Alpha Natural Resources

It was June 2010, and Kevin Crutchfield, CEO of Alpha Natural Resources, and his team of senior executives were facing several critical issues for the coal business. These issues were top of mind as he prepared a presentation he was expected to deliver the following Monday to ANR shareholders at the annual meeting. For fiscal year 2009, the company had revenues of $2,495 million, an increase of 1% ...

Baker Packaging, Inc.

Students consider which capital budgeting approach to take when evaluating a packaging manufacturer's joint venture proposal. Suitable for MBA and undergraduate students, the case presents a scenario in which a lack of short-term profits and the resulting lack of tax payments could make adjusted present value a better choice than weighted average cost of capital. Students also consider how to valu ...

Binomial Option Pricing

This note is designed to introduce the binomial option-pricing model. It covers the basic concepts using a one-period model and then provides an example of a two-period model. The note focuses on a conceptual approach to binomial option pricing rather than formulas. ...

Capital Structure And Firm Value

This note explores the interaction between the use of debt and firm value and provides a brief perspective on the use of debt. It also introduces the notions of financial and operating leverage. In addition, it covers the impact of the use of debt in the presence of no taxes, corporate taxes only, and both personal and corporate taxes. ...

Colt Industries

The focus of this case is an announcement by Colt Industries of its intent to recapitalize the firm. The management proposes to issue $1.5 billion in new debt and pay an $85 cash dividend. The stock price before the announcement was $67. The case requires the student to estimate what the stock price will be after the recapitalization. ...

Consolidated Electric Power Asia

The case is set in Asia. It focuses on the valuation of a company which builds, operates, and then transfers power plants. The valuation problem is to value the projects in place and the estimate how much of the current stock price reflects projects in place and how much is attributable to anticipated future growth. Ideally, the case can be used as a transition between valuation of free cash flow ...

Convertible Unsecured Loan Stocks

This case concerns an analyst who must value a new type of derivative. Three versions of the derivative are described in the case, each requiring a different valuation approach. The case is an exercise in thinking about what the payoff of a derivative is and, based on that, how it should be valued. ...

Corporate Governance in Three Economies: Germany, Japan, and the United States

This case examines the structure of corporate governance in three economies: Germany, Japan and the United States. It presents the structure and background on the composition of Corporate Boards of Directors. The case sets up a discussion of how corporate governance impacts on managerial decisions. ...

Cypress Semiconductor: 1.25% Convertible Notes

The treasury department staff at Cypress Semiconductor Corporation (Cypress) had just received the final draft of the proposal for the pending $600 million convertible bond issue. This would be the latest in a series of convertible bond issuances by Cypress. But this time the situation was quite different. The last offerings were in 2000 when Cypress's stock price was trading in the $40 to $50 ran ...

Derivation Of The Black-Scholes Option-Pricing Model

This note derives the Black-Scholes option-pricing model. It covers the basic assumptions necessary to derive the equation. In addition, it presents the arbitrage conditions used by Black and Scholes in simple terms. The basic stochastic differential equation is derived, and the boundary conditions are specified for the valuation of a European call option. ...

Duration and Convexity

The price of a bond is a function of the promised payments and the market-required rate of return. Because the promised payments are fixed, bond prices change in response to changes in the market-required rate of return. For investors who hold bonds, the issue of how sensitive a bond's price is to changes in the required rate of return is important. There are four measures of bond-price sensitivit ...
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