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You first need to summarize the case to the audience. And try to present your action plans, for
example, by answering the following guideline questions. You are more than welcome to
come up with other issues you find worth addressing.
C. What bond rating do you think Hutchison Whampoa will be able obtain from
Standard and Poors?
D. Compare the debt financing options. Explain why you are for/against the Yankee
bond option.
E. What kind of capital structure would you propose to Hutchison Whampoa and
why?
5. The Yell Group
A. Is Yell a good leveraged buyout candidate?
B. How similar are the U.K. and U.S. businesses? Do the management projections
in Exhibit 6 and Exhibit 7 make sense to you? In other words, if you were part of
the Apax/Hicks Muse team, would you trust them?
C. How does Yells projected debt affect its valuation?
D. How does the cross-border nature of the Yell deal affect the valuation of the firm?
E. How much is Yell worth? How much would you bid?
F. If you were Apax/Hicks Muse would you do the deal?
6. MSDI - Alcala de Henares
A. Compute the net present value of the photoelectric inspection equipment in: a.)
pesetas, by discounting peseta cash flows at a peseta discount rate; and b.)
dollars, by translating future peseta cash flows into dollars at expected future
spot exchange rates. Merck's dollar hurdle rate for a project of this type was 13%.
Assume that at the time of the analysis, annual inflation was expected to be 8%
in Spain and 4% in the United States.
B. How and why do these two net present values differ? Which analytic approach
should Merck use to evaluate this project? Why?
C. How sensitive is the NPV of the new equipment to changes in the peseta/dollar
exchange rate? What happens to the NPV if Spanish inflation is assumed to be
less than 8% per year (assume that expected dollar inflation remains at 4% per
year)?
D. Should Merck headquarters approve the equipment purchase?