...FI 8320, Spring 2005 Cases and Readings in Corporate Finance [pic] [pic] [pic] [pic] Instructor Professor David C. Nachman Office: RCB 1239 Phone: 651-1696 email: dnachman@gsu.edu Office Hours: W 10:00 am – 2:00 pm, or by appointment Prerequisites FI 8000 CSP: 1, 2, 6 Course Description This course focuses on financial policy-making through case analyses, contemporary readings from the professional literature, and problem solving. The emphasis in the course is on investment and financing decisions and their impact on firm value and on capital market imperfections and their impact on the raising of corporate capital. The course also provides an opportunity for the study of additional topics of special current significance such as capital structure and dividend policy, corporate restructuring and the market for corporate control, real options, risk management, international capital budgeting and financing, financial planning and working capital management, project financing, reorganizations and advanced equity valuation. Course Material Required text material • (BMA) R. A. Brealey, S. C. Myers and F. Allen, Principles of Corporate Finance, 8th ed., McGraw- Hill/Irwin, Inc., 2006. •(RP) Reading Packet •(CP) Case Packet The required text (BMA) and the materials that make up the Case Packet (CP) are available at the GSU Book Store. The Reading Packet (RP) is available at ERes. Contents of (CP) and (RP) (with ERes access instructions) follow...
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...REAL OPTION VALUATION: MW PETROLEUM I. Company background and description on each of 4 projects In 1991, Amoco Corporations, a conglomerate of petroleum and chemical corporations, decided to divest some of their smaller properties and when further cuts were needed, they looked to divest the middle section of assets in its marginal curve. As a result, they formed MW Petroleum, a free-standing exploration company that was even as large as some of independent oil companies. It operated exploration and development for well, approximately working interests in 9,500 wells in 300 production areas. Amoco then prepared to sell MW Petroleum to a mid-size independent petroleum company. Apache Corporation was interested in buying most portions of MW and was the only buyer that appears to be a good fit in the market at that time. Apache, with revenue of $270 million, believed that achieving high profit could be realized by acquiring marginal properties and operating well with expertise. Therefore, the deal was likely to be a win-win situation for both parties, if they could reach a reasonable price to accept. The asking price from Amoco was $1 billion. Was it a reasonable price? We will discuss this number, and find a conclusion to this question through our document. II. Valuation Methodology Generally, the Discounted Cash Flow method is the most popular valuation methodology for financial analysts. It uses the concept of time value of money; the future cash flows are estimated...
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...FI 4320, Spring 2005 Cases and Readings in Corporate Finance [pic] [pic] [pic] [pic] Instructor Professor David C. Nachman Office: RCB 1239 Phone: 651-1696 email: dnachman@gsu.edu Office Hours: W 10:00 am – 2:00 pm, or by appointment Prerequisites FI 4000 CSP: 1, 2, 4, 6 Course Description This course focuses on financial policy-making through case analyses, contemporary readings from the professional literature, and problem solving. The emphasis in the course is on investment and financing decisions and their impact on firm value and on capital market imperfections and their impact on the raising of corporate capital. The course also provides an opportunity for the study of additional topics of special current significance such as capital structure and dividend policy, corporate restructuring and the market for corporate control, real options, risk management, international capital budgeting and financing, financial planning and working capital management, project financing, reorganizations and advanced equity valuation. Course Material Required text material • (BMA) R. A. Brealey, S. C. Myers and F. Allen, Principles of Corporate Finance, 8th ed., McGraw- Hill/Irwin, Inc., 2006. •(RP) Reading Packet •(CP) Case Packet The required text (BMA) and the materials that make up the Case Packet (CP) are available at the GSU Book Store. The Reading Packet (RP) is available at ERes. Contents of (CP) and (RP) (with ERes access instructions)...
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...Finance 725 Spring 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 company's 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 needs 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 projected 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? c. 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. ...
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...financial advisors working for Amoco Corporation and Apache Corporation began serious discussions about the sale to Apache of MW Petroleum Corporation, a wholly-owned subsidiary of Amoco Production Company. Amoco had transferred to MW certain of its own assets that it regarded as non-strategic. MW's size, location, and operations were all very attractive to Apache, which had grown nearly 30% per year since the mid-1980s, largely through acquisitions. The transaction being discussed with Amoco would be Apache's largest to date. It would more than double the size of Apache's current operations, as well as its reserves of oil and natural gas. By the end of January 1991, Apache's executives and advisors were sufficiently familiar with the properties in MW to begin refining their estimates of operating and financial performance in order to structure a formal offer. Apache's chief financial officer, Mr. Wayne Murdy, knew that financing would be a challenge, given the size of the proposed transaction. In fact, the availability of external financing, bank debt in particular, was likely to impose some practical limits on both the amount and form of consideration that Apache could offer to Amoco. It was essential that Apache carefully evaluate MW, both the whole and its parts, and study the likely patterns of cash flows so that some creative financing alternatives could be developed. Amoco Corporation Amoco Corporation was an integrated petroleum and chemical company based in...
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...D. WALL THIMOTHY A. LUEHRMAN PETER TUFANO MW Petroleum Corporation (A) A finales de 1990, ejecutivos, ingenieros y asesores financieros de Amoco Corporation y Apache Corporation comenzaron a negociar la venta a Apache de MW Petroleum Corporation, filial que pertenecía en su totalidad a Amoco Production Company. Amoco había transferido a MW algunos de sus activos no considerados estratégicos. El tamaño, localización y operaciones de MW resultaban atractivos a Apache, que había tenido un crecimiento anual de casi un 30% desde mediados de los años ochenta, en gran medida a través de adquisiciones. Esta transacción con Amoco sería la mayor de Apache hasta la fecha: aumentaría en más del doble el tamaño de sus operaciones corrientes, así como sus reservas de petróleo y gas. A finales de enero de 1991, los ejecutivos y asesores de Apache estaban lo suficientemente familiarizados con las propiedades de MW como para empezar a concretar sus planes operativos y financieros, y así estar en condiciones de realizar una oferta formal. El principal agente de finanzas de Apache, Wayne Murdy, sabía que la financiación constituiría un reto, dado el tamaño de la transacción propuesta. De hecho, la dificultad de obtener financiación externa, en particular un préstamo bancario, probablemente pondría límites prácticos a la cuantía y forma de la oferta que Apache podría hacer a Amoco. Era esencial que Apache evaluara cuidadosamente MW, tanto en su conjunto como cada una de sus facetas...
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...Chapter 14 Energy Energy is considered to be the lifeline of economic development. For a developing economy with a high population growth rate, it is important to keep a balance between energy supply and emerging needs. If corrective measures are not effectively anticipated significant constraints start emerging for development activities. The rise in global energy demand has raised questions regarding energy security and increased the focus on diversification, generation and efficient allocation. The answer lies in the attainment of optimal energy mix through fuel substitution by promoting energy efficiency and renewable energy and interregional co-operation. However, oil and natural gas will continue to be the world’s top two energy sources through 2040; accounting for about 60 percent of global demand. Gas being the fastest growing major fuel source over this period is expected to grow at 1.6 percent per year from 2010 to 2040 as estimated by “The Outlook for Energy: A View to 2040” is given in Figure-14.1. Figure 14.1: Global energy demand by fuel type (Quadrillion BTUs) 250 Quadrillions British Thermal Units 2010 200 150 100 2040 2040 2010 From its peak in 2025, coal will decline by more than 10 percent of total Hydro/Geo 2010 2040 Latin America and China are the biggest users of hydro power, which makes up over 80 percent of total Hydro/Geo supplies 2040 50 0 2010 2010 2040 2010 2040 2010 2040 Source: The Outlook for Energy: Aview...
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...Question 1 The rationale of an Apache acquisition of MW Petroleum is plausible, yet there are outstanding concerns. By completing a deal, Apache stands to benefit from several aspects. First, MW isa large company which has more than double Apache’s reserves and it includesproperties that are well-suited to Apache’s operating capabilities. Moreover, on behalf of MW, Amoco operated fields accounting for approximately 80% of MW’s production. Such high operating percentage would promise Apache significant cost-saving opportunities. The acquisition would more than double Apache’s reserves, it would shift Apache’s oil-to-gas ratio from 20-80 to 40-60, and would further diversify Apache geographically. Shifting the oil-to-gas ratio is important because gas prices were highly volatile during this time period while oil was less volatile and, therefore, more predictable. Apache’s revenue stream was high levered and the company’s acquisition driven growth strategy would be more difficult when there is an instability of gas prices. With an acquisition, Apache could also recognize several synergies that would make the deal even more attractive. The properties of MW would diversify Apache geographically and make it more stable in the US market.These include acquired technical data (further exploration possibilities) and several production optimization techniques. Apache would have access to Amoco’s data, which could lead to undiscovered reserves despite that both parties agreed that...
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...Question 1 – Enron Case: A. Fixed volume at fixed price. – Production companies who use the natural gas as a material in producing their final product. By fixing the price, they insure themselves from increasing prices and can forecast and meet their budgeted costs as well as budgeted profit margins. B. Fixed volume at price tied to a natural gas index. – Speculators who will engage in risky financial transactions in an attempt to profit from fluctuations in the market value of a tradable good. They focus purely on price movements. C. Fixed volume at price tied to a natural gas index and capped at a determined level - Utility companies, who know the required volume and will prefer to purchase contract where prices are tied to a natural gas index, if the prices go down they will not lose money however, at the same time by capping at a determined level they are insuring themselves from increasing prices. Question 2 - Tennessee Valley Authority Case: A. Tennessee Valley Authority (TVA) could add capacity to provide power to its customers without actually building physical plants by purchasing call options. These options would allow TVA the right to exercise the option in order to meet demand. Should there be no demand at that particular time TVA simply would not execute their call options. Main Constraint –since TVA is purchasing physical settlement, the credit rating of suppliers is very important, which means TVA can have option purchase...
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...[pic] |[pic] |[pic] | |IMPORTANT NOTICE | | | |IMPORTANT NOTICE | | | |A CARE Solar Energy Grade reflects CARE’s opinion on the performance capability and financial strength of the graded entity. This | |grading does not constitute an audit by CARE. The grading is based on information provided by the company or obtained by CARE from | |sources it considers reliable. CARE does not guarantee the completeness or accuracy of the information on which the grading is based. A| |CARE grading is not a recommendation to use the services of the graded entity, or to invest in any project undertaken by it, or to lend| |to the entity or invest in any financial instrument issued by it. | | ...
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...Act were moving generation and distribution out of ‘License Raj’ regime, opening access to national grid and demolishing the ‘Single Buyer’ model. The failure of the huge federal structure and the changing global scenario have forced Government to think of ways to revive this fundamental infrastructure sector. Two of the avenues that government can count on for future growth of this sector is “Midgets or Small Power Plants” and “CDM—Clean Development Mechanism”. India and Infrastructure With traditional government controlled vertically integrated monopoly giving way for new multi-player market-driven scenario, the opportunity in power sector attracted entrepreneurs into the sector. The ever-growing demand gap asked for addition of 1000 MW generation capacity per year. These forces coupled gave rise to different strategies that were new to the sector. One of the fast growing strategies that attracted a lot of players was—Small...
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...Sustainable Business Operation in the Philippines Alsons Consolidated Resources, Inc. In partial fulfilment of the course requirements in Management Accounting By: Ma. Isabel Lagunilla Hocson sab.lagu@gmail.com Submitted to : Dr. Marivic Manalo December 13, 2013 Sustainable Business Operation in the Philippines 2 I. Introduction Just last month, the country experienced the strongest typhoon to hit the Earth. No amount of preparation is enough to survive such wrath from Mother Nature. Before Yolanda hit the Philippines, a lot of typhoons passed the country. These typhoons left behind destructed homes and dead people as a result severe flooding brought about by non-segregation and throwing of trash anywhere. Illegal logging also contributed to flash floods. All these are reasons why we should start being concerned not only for the businesses we are part of but also its neighbouring communities. Sustainability should be the one goal of all businesses. It is a prerequisite for economic growth and poverty reduction in Asia and the Pacific. The market has shown an increase of concern for sustainability and its impact to the environment and because of this, companies have created new processes economically, socially and more importantly environmentally. This study aims to look at the optimism of Philippine businesses on the adaptation of cleaner operations for sustainable development. A lot of environmental laws has been passed the last few years both from the...
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...Reproduced with permission from Energy for Sustainable Development Articles Synthetic fuel production by indirect coal liquefaction Eric D. Larson Princeton Environmental Institute, Princeton University Guyot Hall, Washington Road, Princeton, NJ 08544-1003, USA E-mail: elarson@princeton.edu Ren Tingjin Department of Thermal Engineering, Tsinghua University, 100084 Beijing, China This paper reports detailed process designs and cost assessments for production of clean liquid fuels (methanol and dimethyl ether) by indirect coal liquefaction (ICL). Gasification of coal produces a synthesis gas that can be converted to liquid fuel by synthesis over appropriate catalysts. Recycling of unconverted synthesis gas back to the synthesis reactor enables a larger fraction of the coal energy to be converted to liquid fuel. Passing synthesis gas once over the synthesis catalyst, with unconverted synthesis gas used to generate electricity in a gas turbine combined cycle, leads to less liquid fuel production, but provides for a significant second revenue stream from sale of electricity. Recently-developed liquid-phase synthesis reactors are especially attractive for ‘‘oncethrough’’ processing. Both ‘‘recycle’’ and ‘‘once-through’’ plant configurations are evaluated in this paper. Because synthesis catalysts are poisoned by sulfur, essentially all sulfur must be removed upstream. Upstream removal of CO2 from the synthesis gas is also desirable to maximize synthesis productivity, and it provides...
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...9 Kazakhstan Kazakhstan Energy report (Forecast closing date: August 6th 2009) Energy consumption, international comparison (m tonnes oil equivalent) Kazakhstan US Japan China Germany Source: Economist Intelligence Unit. 2004 a 60 2,354 530 1,418 346 2005 a 68 2,362 527 1,567 343 2006 a 70 2,362 b 527 b 1,718 344 2007 b 74 2,370 522 1,853 347 2008 b 78 2,338 510 1,977 347 2009 c 76 2,284 490 2,003 339 2010 c 76 2,274 492 2,094 338 2011 c 77 2,272 496 2,207 338 2012 c 77 2,275 499 2,330 341 2013 c 78 2,301 503 2,457 345 a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. Overview Kazakhstan"s oil sector accounts for around 30% of GDP and more than half of the country"s export revenue. With proven reserves of 39.8bn barrels in 2008, according to BP (a UK oil conglomerate), the largest proven oil reserves base of the Caspian Sea region, it accounts for 3.2% of the world"s total oil reserves, and has a reserves-to-production ratio of 70 years. Gas output (at around 30bn cu metres annually) and consumption is currently roughly balanced, although exports are set to rise as output at the main Karachaganak field picks up. Owing to the Soviet-era structure of Kazakhstan"s gas and electricity distribution networks, which are concentrated in the northern and western regions, closest to the main sources, Kazakhstan is forced to import both resources for the southern regions. The government has become...
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...Energy, Infrastructure and Communications I n tandem with the pick-up in overall industrial growth, core industries and infrastructure services have also evinced signs of recovery with easing of supply bottlenecks in certain sectors and demand recovery in others. The robust growth momentum in telecommunications, particularly the wireless segment, continues with monthly additions exceeding 17.6 million connections. In the midst of the worstever slowdown in the history of world civil aviation, even the modest levels of growth in India are indicative of resilience. Core industries like power, coal and other infrastructure like ports and roads are also reviving. Available evidence points to a steady revival of flows of investible resources. However, the levels of broadband penetration, capacity creation in some crucial infrastructure sectors and the state of development of markets for longterm finance remain causes for concern. There is need to develop infrastructure to complement and sustain the economic growth momentum. Efforts—legislative, administrative and executive—are on to minimize the infrastructure deficit, ameliorate bottlenecks in completion of projects and nurture core industrial intermediates and infrastructure services. 10 CHAPTER 10.2 The stimulus measures announced by the national authorities worldwide to combat the economic slowdown contained infrastructure buildup plans. In line with the rest of the world, the Union Budget for 2009-10 substantially stepped...
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