The document contains suggested advance questions for students on several case studies, including:
- Krispy Kreme: Questions focus on analyzing financial statements and ratios to assess financial health over time and reasons for a recent share price decline.
- FedEx vs UPS: Questions compare the two companies' strategies, performance based on financials/ratios/stock prices, and assess which has attained sustainable competitive advantage.
- Star River Electronics: Questions involve forecasting financials, assessing financial health, identifying key drivers of performance, estimating weighted average cost of capital, and analyzing a potential investment.
- Nike: Questions focus on calculating and justifying weighted average cost of capital, costs of equity, and recommending an
The document contains suggested advance questions for students on several case studies, including:
- Krispy Kreme: Questions focus on analyzing financial statements and ratios to assess financial health over time and reasons for a recent share price decline.
- FedEx vs UPS: Questions compare the two companies' strategies, performance based on financials/ratios/stock prices, and assess which has attained sustainable competitive advantage.
- Star River Electronics: Questions involve forecasting financials, assessing financial health, identifying key drivers of performance, estimating weighted average cost of capital, and analyzing a potential investment.
- Nike: Questions focus on calculating and justifying weighted average cost of capital, costs of equity, and recommending an
The document contains suggested advance questions for students on several case studies, including:
- Krispy Kreme: Questions focus on analyzing financial statements and ratios to assess financial health over time and reasons for a recent share price decline.
- FedEx vs UPS: Questions compare the two companies' strategies, performance based on financials/ratios/stock prices, and assess which has attained sustainable competitive advantage.
- Star River Electronics: Questions involve forecasting financials, assessing financial health, identifying key drivers of performance, estimating weighted average cost of capital, and analyzing a potential investment.
- Nike: Questions focus on calculating and justifying weighted average cost of capital, costs of equity, and recommending an
The document contains suggested advance questions for students on several case studies, including:
- Krispy Kreme: Questions focus on analyzing financial statements and ratios to assess financial health over time and reasons for a recent share price decline.
- FedEx vs UPS: Questions compare the two companies' strategies, performance based on financials/ratios/stock prices, and assess which has attained sustainable competitive advantage.
- Star River Electronics: Questions involve forecasting financials, assessing financial health, identifying key drivers of performance, estimating weighted average cost of capital, and analyzing a potential investment.
- Nike: Questions focus on calculating and justifying weighted average cost of capital, costs of equity, and recommending an
Suggested Questions for Advance Assignment to Students
1. What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.? 2. How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise? 3. Is Krispy Kreme financially healthy at year-end 2004? 4. In light of your answer to question 3, what accounts for the firms recent share price decline? 5. What is the source of intrinsic investment value in this company? Does this source appear on the financial statements? FEDEX VS UPS Suggested Questions for Advance Assignment to Students 1. Prepare to describe in class the competition in the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business? 2. Why did FedExs stock price outstrip UPSs during the initiation of talks over liberalized air cargo routes between the U.S. and China? Assuming a perfectly efficient stock market, how might one interpret a 14% increase in FedExs market value of equity? 3. How have FedEx and UPS performed since the early 1990s? Which firm is doing better? In class, prepare to discuss the insights you derived from the two firms financial statements, financial ratios, stock-price performance, and economic profit (economic value added or EVA). Also, prepare to describe how EVA is estimated, and its strengths and weaknesses as a measure of performance. 4. If you had to identify one of those companies as excellent, which company would you choose? On what basis did you make your decision? More generally, what is excellence in business?
STAR RIVER ELECTRONICS
Advance Assignment to Students 1. Assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh? 2. Forecast the firms financial statements for 2002 and 2003. What will be the external financing requirements of the firm in those years? Can the firm repay its loan within a reasonable period? 3. What are the key driver assumptions of the firms future financial performance? What are the managerial implications of those key drivers? That is, what aspects of the firms activities should Koh focus on especially? 4. What is Star Rivers weighted-average cost of capital (WACC)? What methods did you use to estimate WACC? What are the key assumptions that especially influence WACC? 5. What are the free cash flows of the packaging machine investment? Should Koh approve the investment? NIKE Suggested Advance Study Questions 1. What is the WACC and why is it important to estimate a firms cost of capital? Do you agree with Joanna Cohens WACC calculation? Why or why not? 2. If you do not agree with Cohens analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. 3. Calculate the costs of equity using CAPM, the dividend discount model, and the earnings capitalization ratio. What are the advantages and disadvantages of each method? 4. What should Kimi Ford recommend regarding an investment in Nike? CALIFORNIA PIZZA KITCHEN Suggestion for Advance Assignment to Students 1. In what ways can Susan Collyns facilitate the success of CPK? 2. Using the scenarios in case Exhibit 9, what role does leverage play in affecting the return on equity (ROE) for CPK? What about the cost of capital? In assessing the effect of leverage on the cost of capital, you may assume that a firms CAPM beta can be modeled in the following manner: L = U[1 + (1 T)D/E], where U is the firms beta without leverage, T is the corporate income tax rate, D is the market value of debt, and E is the
market value of equity.
3. Based on the analysis in case Exhibit 9, what is the anticipated CPK share price under each scenario? How many shares will CPK be likely to repurchase under each scenario? What role does the tax deductibility of interest play in encouraging debt financing at CPK? 4. What capital structure policy would you recommend for CPK?