Value-Based Management and Course Summary Week 15 – December 4, 2002 1

FBE 432: Case Course Goal: Understand implications of financial theory in real situations Objectives: Students take a position on a financial policy or strategy and defend their decision using financial theory By-product: Gain exposure to a wide variety of financial issues in a broad range of market contexts (e.g. domestic and international) and many “war stories”

Review Cases: Investment Banking Eskimo Pie Continental Carriers Hostile Bid for Red October

Review Cases: Venture Capital The John Case Co. Trendsetters

Review Cases: Risk Management For risk management, we had more lecture coverage of technical background: Measuring risk exposure Techniques for risk management Derivative securities: futures and forward contracts, options, and swaps Liabilities Management at Union Carbide

Review Cases: Financial Strategy PPL Clarkson Lumber Avon Products

Review Cases: International Capital Markets Corporate Governance Huaneng Power International Corporate Governance Circon (A) Value-Based Management Vyaderm

Summary Value and valuation is the key in finance Cash flows, discount rates, and present values are the critical tools and assumptions for each are the main points of debate Accounting concepts (like income) and numbers are important inputs but finance is forward-looking and requires assumptions Finance theory is essential in framing a convincing argument, either as benchmarks for analysis or in assessing real-world departures from assumptions underlying finance theories

Advice from Professor Common sense precedes careful analysis and analysis must be measured against plausibility and reasonableness It is important to enjoy what you are doing, more important than anything, do not adopt other people’s concept of success Balance is essential: finance is a partial view of the world, your job is in many ways the least important part of your life

Examination – Dec. 13, 2002 Format same as midterm (multiple choice and longer answer) Coverage is 2/3 on material since midterm and 1/3 before midterm Two-hour examination: final counts twice and midterm once, drop lowest of three Review weekly objectives and vocabulary Review syllabus to focus attention on important finance theories used in cases