Finance 7311

Financial Planning

Remaining Game Plan

Case 17: The Investment Detective (class discussion Wednesday, April 8)

This case is self-explanatory.

Case 19: Vesuvio Fonderia SpA (Monday, April 13)

Please assess the economic benefits of acquiring the Bond-O-Matic molding machine. What is the initial outlay? What are the benefits over time? What is an appropriate discount rate? Does the net present value (NPV) warrant the investment in the machine?
What uncertainties or qualitative considerations might influence your recommendation? How, if at all, would an inflation rate of 10 percent (or higher) affect the attractiveness of the Bond-O-Matic? Please estimate the impact on NPV from a change in any of these elements.
Should Angela Lombardi proceed with the project?

Sample Valuation Exercises: Questions 3 & 4 in Higgins, pgs 352-354 (class discussion, Monday, April 20/Wednesday, April 23)

Case 42: Brown-Foreman Distillers Corporation (Monday, April 27)

Should Brown Forman buy Southern Comfort Corporation at the asking price of $94.6 million?
On what key assumptions does your answer to the first question depend? How robust is the purchase decision to variations in those key assumptions?
If Brown agrees to acquire Southern Comfort, to what key considerations should he devote his attention in order to make the acquisition an economic success?
Apart from the possible acquisition, how appropriate is Brown-Forman's hurdle rate of 12 percent for projects in place?