C O U R S E M A T E R I A L S

2012

Articles

Books & Chapters

Cases

Course Modules

Online Courses

Simulations

FINANCE

Harvard Business Publishing serves the finest learning institutions worldwide with a comprehensive catalog of case studies, journal articles, books, and eLearning programs, including online courses and simulations. In addition to material from Harvard Business School and Harvard Business Review, we also offer course material from these renowned institutions and publications:

� Babson College

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CASES

Cases, slices of business life, focus on actual problems and decisions facing a company. Students are challenged to put themselves in the protagonist’s place and suggest business strategies, tactics, and solutions.

New Cases

Accounting for the iPhone at Apple Inc.Apple initially recognized revenue associated with the iPhone using subscription accounting. In 2008, the company started providing non-GAAP supplemental numbers and recognized all of the revenue up front. Reactions to the disclosure were mixed. Students explore the criteria for revenue recognition in the context of multiple deliverables. Harvard Business School #111003

A Slice of the Pie: Ruby Collins and Tenants in CommonA securitized small real estate investment vehicle fails and the many individual owners have to decide how to manage or dispose of the asset. Students explore investing in and valuing real estate, the rules of Section 1031 Like Kind Exchanges, and Tenants-in-Common ownership. Harvard Business School #211008

Air Canada—Risk ManagementThe CEO of Air Canada reviews the company’s risk management program and considers making changes. He identifies the most relevant sources of external risk that could affect the company’s performance and considers how to best manage them. He must consider the state of the economy, interest rates, exchange rates, and commodity markets. Ivey School of Business #910N37

ALAC InternationalA Taiwanese producer awards the U.S. distribution rights for an important chemical to ALAC, a small importer of specialty industrial chemicals. As a result, ALAC’s sales triple almost immediately and are expected to double again in the coming year. The firm must obtain financing for the explosive growth in its inventory and accounts receivables balances. Harvard Business School #211065

Braddock Industries, Inc.The newly appointed CEO of a publicly traded company reviews the company’s management incentive compensation program. The company is recovering from the economic downturn and profits are rising but both company revenue and stock price are stagnant. Students examine the drivers of economic value creation for shareholders and how these drivers are reflected in compensation programs. Harvard Business School #211061

Countrywide PLCA firm that invests in distressed companies considers investing in the debt of Countrywide PLC, the largest real estate agent in the U.K. Although Countrywide has a strong portfolio of assets, the company is in danger of defaulting on its debt obligations and being forced to restructure under the U.K. Scheme of Arrangement. Harvard Business School #211026

Executive Compensation at Talent PartnersThe CEO of a small privately held company has been highly successful at increasing revenue and establishing the company as an industry leader. His executive compensation package includes a mix of salary and options but he does not own any equity in the company. Students explore the strengths and weaknesses of options-based compensation. Harvard Business School #211073

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Financing Higher Education in AustraliaStudents in Australia have long benefited from low tuition and large government subsidies. Faced with budget deficits, the government of Australia demands that educational financing be overhauled. The prime minister considers options for changing the way higher education is funded including asking his Labor Party to abandon its position on free education. Harvard Business School #711047

Gemini InvestorsA private equity firm focuses on investing in small firms and lower-middle-market businesses with revenue between $8 million and $30 million. As the firm completes investment of committed capital in an existing fund, the partners must decide whether to raise a new fund sized similarly to their other funds or raise a significantly larger fund. Harvard Business School #211066

Google and Earnings GuidanceSix years after Google’s IPO, the company remains committed to a “no-guidance” policy. Google is expanding its business by developing new products and services and industry analysts want to see a change in policy. This case provides an overview of guidance practice among major U.S. companies. Harvard Business School #111026

H Partners and Six FlagsA hedge fund invests a significant amount of the firm’s working capital in the senior bonds of bankrupt amusement park operator Six Flags. The founder is pleased with the performance of the bonds and considers the next steps. Several options are possible including closing the investment at a substantial gain or waiting for Six Flags to emerge from bankruptcy. Harvard Business School #211090

HelloWalletHelloWallet is an online, independent provider of financial guidance and offers a range of services for personal financial management designed to help individuals make buying decisions. Following the launch of a beta web site, the firm must decide how to price its products and allocate resources for direct-to-consumer and enterprise customer channels. Stanford University #F275

National Public BroadcastingThe CEO of a media underwriting representative for public television and radio stations throughout the U.S. receives an unsolicited offer to purchase the company. The unexpected offer gives the CEO and his partners a significant cash payment. This case lets students explore the effects of ownership structure decisions on the sale of a small business. Harvard Business School #211058

New Delhi Water and PowerThe government of the National Capitol Territory of Delhi attempts to privatize its electric distribution company and reform its municipal water company. Students explore the common problems around the delivery of water and power services in developing countries and the challenges governments face when they attempt reform. John F. Kennedy School of Government #HKS103

The Pecora HearingsIn 1932, in the depths of the Great Depression, the Senate Banking Committee began a much-publicized investigation of the nation’s financial sector known as the Pecora hearings. Students explore the financial crisis and financial regulation of the 1930s leading up to the congressional testimony of New York Stock Exchange president Richard Whitney. Harvard Business School #711046

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Progreso Financiero: Growing SalesA socially responsible consumer lending company focuses on the underserved Hispanic market by extending small loans at favorable rates. An important part of the company’s business model is to educate customers on how credit works and how to improve their credit ratings. None of the firm’s sales channels are performing well and the CEO must find a way to increase sales to keep the company in business. Stanford University #E395

UFIDA (D)UFIDA is the largest provider of enterprise management software in China. Students must analyze the capital requirement necessary to support the firm’s tremendous growth and identify a long-term strategic investment plan to achieve the revenue goals set by the CEO. This case must be used with UFIDA (A), #TU0007. Tsinghua University #TU0013

Popular Cases

Acquisition of Consolidated Rail Corp. (A) CSX, the largest railroad in the eastern U.S., and Consolidated Rail, the third-largest railroad, announce their intent to merge in a deal worth $8.3 billion. Acting as shareholders, students analyze the terms of the CSX offer and place a value on Conrail as an acquisition target. Students must decide whether to tender shares into the front end of a two-tiered acquisition offer. Harvard Business School #298006

Airbus A3XX: Developing the World’s Largest Commercial Jet (A) The supervisory board at Airbus Industries is about to approve a $13 billion investment for the development of a new super jumbo jet known as the A3XX. The company already has 20 orders for the new jet and the board must decide if there is sufficient long-term demand to justify the investment. Harvard Business School #201028

American Home Products Corp. American Home Products is a company with virtually no debt and growing cash reserves. The CEO is proud of the balance sheet and believes strongly in avoiding any kind of loan. The case requires students to analyze the company’s debt policy and capital structure and make recommendations to the CEO. Harvard Business School #283065

Arundel Partners: The Sequel Project Arundel Partners considers buying the sequel rights for a portfolio of feature films from one or more major U.S. film studios. The firm must determine how much to pay and how to structure each contract. Students examine cash flow estimates for a list of major films released in the U.S. and estimate the value of sequel rights. Harvard Business School #292140

Butler Lumber Co. Butler Lumber Co. needs increased bank financing to support current rapid sales growth coupled with low profitability. Students must determine the reasons for the rising bank borrowing, estimate the amount of borrowing needed, and assess the attractiveness of the loan from the bank. Harvard Business School #292013

Clarkson Lumber Co. The owner of Clarkson Lumber Co., a rapidly growing retail lumber company, considers the financial implications of continued rapid growth. Despite good profits, the company experiences cash shortages and must borrow to cover expenses. Students are required to analyze the company’s financing requirements. Harvard Business School #297028

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Cost of Capital at Ameritrade Ameritrade Holding Corp. is planning large marketing and technology investments to improve the company’s competitive position. To determine whether the strategy can generate sufficient cash flows, the CEO needs an estimate of the project’s cost of capital. However, there is considerable disagreement about the correct cost of capital investment. Harvard Business School #201046

Marriott Corp.: The Cost of Capital (Abridged) Investment projects at Marriott Corp. are selected by discounting the cash flows by the appropriate hurdle rate for the division. The company is also considering using hurdle rates to determine incentive compensation. The case requires students to use the capital asset pricing model (CAPM) to calculate the cost of capital for each of the company’s divisions. Harvard Business School #289047

Ocean Carriers Ocean Carriers, a shipping company, evaluates a proposal to lease a ship for a three-year period. One of Ocean Carriers’ customers is eager to finalize the contract for the new ship since no existing ship in the fleet is able to meet the customer’s requirements. Harvard Business School #202027

BRIEF CASES

Rigorous and compact, Brief Cases from Harvard Business Publishing present realistic management challenges for students to discuss.

NEW! Harmonic Hearing Co.Two employees from a small manufacturer of hearing aids consider purchasing the company from the founder. While the decision to purchase Harmonic is easy for them, arranging financing proves more difficult. Two financing alternatives are presented: one is virtually all debt-financed, the other all equity. The financing structure will significantly affect future products and firm performance. #4271

NEW! Valuation of AirThread ConnectionsA senior associate in the business development group at American Cable Communications must prepare a preliminary valuation for acquiring AirThread Connections, a regional cellular provider. This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. #4263

Blaine Kitchenware, Inc.: Capital Structure In response to an unsolicited takeover, a kitchen appliance maker contemplates using excess liquidity and additional borrowing for a stock repurchase. The company must determine the effects of increasing leverage on the cost of capital, firm value, and share price. #4040

Ceres Gardening Company: Funding Growth in Organic Products An aggressive player in the organic gardening industry offers steep discounts and vendor financing to its retailers in an effort to increase market penetration. Students analyze the company’s financial statements and make projections. #4017

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Flash Memory, Inc. A small firm in the computer and electronic device memory market must invest heavily in new product development to stay competitive. The CFO prepares plans for investing and financing over the next three years and considers alternatives for additional funding in light of increased working capital requirements. #4230

Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation Groupe Ariel evaluates a proposal from its Mexican subsidiary to purchase and install cost-saving equipment at a manufacturing facility. Ariel corporate policy requires a discounted cash flow (DCF) analysis and an estimate for the net present value (NPV) for capital expenditures in foreign markets. #4194

Hansson Private Label, Inc.: Evaluating an Investment in Expansion A manufacturer of private-label personal care products must decide whether to fund an unprecedented expansion of manufacturing capacity. This case requires students to complete a fundamental analysis of the project, including the development of cash flow projections and net present value (NPV) calculations. #4021

Jones Electrical Distribution Despite several years of rapid sales growth and good profits, Jones Electrical Distribution experiences short-term cash shortages. The company is unable to take discounts on accounts payable and increasingly relies on loans from the bank to cover expenses. The owner weighs the options for managing sales growth against the need for additional financing. #4179

Mercury Athletic: Valuing the Opportunity The head of business development at Active Gear Advantage, a midsize athletic footwear company, considers the opportunity to acquire Mercury Athletic and double the size of his business. Students gain exposure to basic discounted cash flow (DCF) valuation using the weighted average cost of capital (WACC). #4050

Midland Energy Resources, Inc.: Cost of Capital The senior vice president of project finance for a global oil and gas company must determine the weighted average cost of capital (WACC) for the company as a whole and for each of its divisions. Students become familiar with WACC, the capital asset pricing model (CAPM), and associated data and formulas. #4129

Monmouth, Inc. A leading producer of engines and massive compressors for the natural gas industry considers whether to acquire a tool company. Students must choose an approach for valuing the company and consider how the offer should be structured and implemented. #4226

New Heritage Doll Company The New Heritage Doll Company, a midsize privately owned domestic firm, evaluates two investment alternatives. The case explores basic issues in capital budgeting and requires students to analyze financial information from competing capital budgeting projects and choose a single investment project. #4212

Æ Find more cases and Brief Cases at hbsp.harvard.edu

ROLE PLAYS

Role Plays help students develop their decision-making skills by setting up realistic business challenges that require students to use negotiation techniques to work out the best possible solutions. Each Role Play is accompanied by a comprehensive Teaching Note.

Riggs-Vericomp Negotiation A computer recycling equipment manufacturer must negotiate with a chip maker on price, service delivery, and payment schedule. The goal: maximize net value compared to an existing deal on the table. Two roles available: #801096 and #801097

Travelexis.com SCOUT, a web portal, negotiates with potential acquisition Travelexis, an online travel booking site. Three roles available: #903059, #903060, and #903061

WineMaster.com Students negotiate the sale of WineMaster.com to potential buyer HomeBase.com. Negotiations cover stock options and vesting. Two roles available: #800249 and #800250

Æ Find more Role Plays at hbsp.harvard.edu

ARTICLES

Articles from Harvard Business Review and other renowned journals provide up-to-the- minute ideas from the best business thinkers.

Popular Articles

Are You Paying Too Much for That Acquisition? The purchase price of an acquisition is almost always higher than the intrinsic value of the company based on the price of the company’s stock before an announcement. This article describes a systematic approach to calculating the optimum price that requires a careful analysis of the “synergy value,” the value that results from improvements following the acquisition. Harvard Business Review #99402

How Venture Capital Works An analysis of present-day venture capitalists dispels many myths about how they operate. In the past, venture capitalists were legendary for taking risks. In reality, venture capitalists are expected to earn consistently superior returns on investments in inherently risky businesses. They succeed by structuring deals to minimize risk and maximize returns. Harvard Business Review #98611

Investment Opportunities as Real Options: Getting Started on the Numbers This article presents a framework for bridging the gap between the practicalities of real-world capital projects and the higher mathematics associated with formal option-pricing theory. This step-by-step approach maps out the exact relationship between a project’s characteristics and five variables that determine the value of a simple call option on a share of stock. Harvard Business Review #98404

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Making the Deal Real: How GE Capital Integrates Acquisitions Thousands of companies every year acquire other companies or are acquired themselves. Yet statistics show that nearly half of all mergers fail. One company that has been very successful in the acquisition and integration process is GE Capital. Consultants from GE Capital offer four lessons for successful integration following an acquisition. Harvard Business Review #98101

Options Approach to Capital Investment Companies make capital investments to create and exploit profit opportunities. This article suggests that the simple net present value rule should be modified. The present value of the expected stream of cash from a project must exceed the cost of the project by an amount equal to the value of keeping the investment option alive. Harvard Business Review #95303

Stock or Cash? The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions In 1988, fewer than 2% of large acquisition deals were paid for entirely in stock. By 1998, that number had risen to 50%. This article provides a framework and two simple tools for choosing between cash and stock as payment in mergers and acquisitions. The author believes the choice between cash and stock should never be made without full and careful consideration of the potential consequences. Harvard Business Review #99611

Using APV: A Better Tool for Valuing Operations For the past 25 years, using a discounted cash flow (DCF) methodology and the weighted average cost of capital (WACC) has been the commonly accepted practice for valuing assets. This article suggests a more versatile and reliable alternative: using the adjusted present value (APV). Harvard Business Review #97306

What’s It Worth?: A General Manager’s Guide to Valuation The resource allocation decisions that companies make depend on calculating what the decision is worth. Over the years, valuation tools have become increasingly sophisticated. This article provides an overview of three valuation tools and explains how they work and when to use them. Harvard Business Review #97305

Æ Find more articles at hbsp.harvard.edu

SIMULATIONS

Online simulations present real-world management challenges for students and encourage classroom interaction and discussion. Results are available immediately for a comprehensive debrief session. All simulations include a detailed Facilitator’s Guide.

NEW! Finance Simulation: Capital Budgeting In this single-player simulation, students assume the role of a member of the capital committee at a high-end doll manufacturing company. Students review 27 different proposals over five simulated years to decide which projects to fund across the company’s three divisions. Ultimately, students must develop a capital budgeting strategy and choose projects with the greatest impact on the firm’s profitability. #3357

Finance Simulation: Blackstone/Celanese This team-based simulation, based on the landmark acquisition of Celanese AG by the Blackstone Group in 2003, teaches principles of private equity finance. Students play the role of either Blackstone or Celanese and conduct due diligence, establish deal terms, respond to bids and counterbids, and consider the interests of other stakeholders. #3712

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Finance Simulation: M&A in Wine Country Students play the role of CEO at one of three wine producers: Starshine, Bel Vino, or International Beverage. They must determine value targets and reservation prices and negotiate deal terms before deciding to accept or reject final offers. This team-based simulation teaches core principles of valuation, M&A strategy, and negotiation. #3289

Æ Find more simulations at hbsp.harvard.edu

COURSE MODULES

Course Modules offer a road map to the best teaching materials, with recommendations on how to organize them. Each module suggests 4–6 items plus some alternate suggestions. Popular modules in Finance include the following:

� UPDATED! Capital Structure � UPDATED! Net Present Value and Capital Budgeting � UPDATED! Company Valuation � UPDATED! Real Options � UPDATED! Corporate Restructuring � UPDATED! Risk Management � UPDATED! Mergers and Acquisitions � UPDATED! Risk, Return, and Cost of Capital    

Æ Find more Course Modules at hbsp.harvard.edu

BOOKS & CHAPTERS

Individual chapters may be integrated into course materials, while books may serve as primary class texts.

Anticipating Correlations: A New Paradigm for Risk ManagementEffective risk management tools provide much-needed help to prepare for unpredictable changes in financial markets. These chapters provide guidance in creating a better way to forecast correlations among large systems of assets. Princeton University Press. Only available in chapters. #PRN009–#PRN020

Ben Bernanke’s Fed: The Federal Reserve After GreenspanBen Bernanke is considered by many to be the world’s most powerful economist. This book offers an in-depth study of the policies, strategies, and actions of Bernanke as chairman of the Federal Reserve and explores how the Federal Reserve analyzes and manages the economy. Harvard Business Review Press. Available in chapters. #2584

Financial Intelligence: a Manager’s Guide to Knowing What the Numbers Really Mean Understanding how to read a balance sheet, recognizing a liquidity ratio, and calculating return on investment are important skills for managing the financial side of a company. In an accessible, “jargon free” style, this book provides a solid foundation in the core concepts of finance along with practical strategies for improving company performance. Harvard Business Review Press. Available in chapters. #7642

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Investors and Markets: Portfolio Choices, Asset Prices, and Investment AdviceMaking good portfolio choices requires an understanding of the determinants of asset pricing. Written by Nobel Prize-winning economist William F. Sharpe, this book presents a nonmathematical method of analyzing asset prices that accounts for the real behavior of investors. Princeton University Press. Only available in chapters. #PRN001–#PRN008

Æ Find more books and chapters at hbsp.harvard.edu

ONLINE COURSES

Available in SectionsOnline courses introduce complex subjects and can be used in advanced undergraduate business courses, as prematriculation requirements for MBAs, or assigned as homework over a semester or year. Online courses are available as complete courses or in sections.

Mathematics for ManagementFollowing the story line of several family-owned businesses, students learn how apply math concepts to solve problems, analyze data, and predict outcomes.

� Complete Course #3350 � Algebra Section #6004 � Calculus Section #6006 � Statistics Section #6007 � Probability Section #6008 � Finance Section #6009

Finance Online CourseThis course introduces core concepts in Finance ranging from ratio analysis to valuation and from pro forma estimating to capital structure. The storyline provides a meaningful and engaging context in which students learn the material.

� Complete Course #208719 � Introductory Section #6000

Quantitative MethodsSet in a Hawaiian resort, this course teaches statistics and regression analysis from a management perspective. Students develop statistical models for making better business decisions.

� Complete Course #504702 � Regression Section #6012

Spreadsheet ModelingDemonstrates how to use Excel functionality to solve business problems.

� Complete Course #3252 � Introductory Section #6010 � Advanced Section #6011

Æ Find more online courses at hbsp.harvard.edu

GENERAL PUBLIC

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