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Final Assessment – Cost of Capital, M&A and Financial Distress Written assignment – 3 Mini Cases BCO315 Corporate Finance (2CH/3ECTS) Online campus Professor: Miguel Corte-Real – miguel.corte-real@euruni.edu]
Description 3 Mini-cases based on the material discussed in class (please see questions below)
Format This activity must meet the following formatting requirements:
• Font size 12
• Double-spaced
• Harvard Referencing System
• Please submit the document: Pdf format
• (Word count to be discussed in class)
Goal(s) The student should be able to link the material covered during the sessions and the 3 mini-cases.
Weight towards final grade
This activity has a weight of 50% towards the final grade.
Learning outcomes
This task assesses the following learning outcomes: Demonstrate a deep understanding of: Cost of capital Mergers and acquisitions Financial distress
Assessment criteria
Please refer to the rubric – written assignment, in the next page.
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Group I
1. Most financial managers measure debt ratios from their companies’ book balance sheets. Many financial economists emphasize ratios from market-value balance sheets. Which is the right measure in principle? Does the trade-off theory propose to explain book or market leverage? How about the pecking-order theory?
2. Some corporations’ debt–equity targets are expressed not as a debt ratio but as a target debt rating on the firm’s outstanding bonds. What are the pros and cons of setting a target rating rather than a target ratio?
Group II
1. Examine a hostile acquisition and discuss the tactics employed by both the predator and the target companies. Do you think that the management of the target firm was trying to defeat the bid or to secure the highest price for its stockholders? How did each announcement by the protagonists affect their stock prices?
2. How do you think mergers should be regulated? For example, what defenses should target companies be allowed to employ? Should managers of target firms be compelled to seek out the highest bids? Should they simply be passive and watch from the sidelines?
(please link your answers to the videos shared during our class sessions)
Group III
1. Corporate restructurings can take several different forms. Explain in a detailed manner the various types of corporate restructurings and the differences between these types of restructurings (please refer to the material discussed during the classes).
2. Please describe the various types of bankruptcies discussed during the classes and how can some of these bankruptcies be linked to International Joint Ventures failures (refer to the cases discussed during our classes).
3. Please refer to our guest speaker lecture on ESG - Environmental, Social and Governance – in your opinion what were the most relevant topics during the presentation and are the potential impact of ESG topic within the M&A transactions.
4: Please explain in a detailed manner the increase impact of hedge funds in the Mergers, Buyouts and Corporate Restructurings activities (refer to the material provided during the classes including the videos) and how hedge funds can have an impact within companies that are going through financial distress.
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Rubric: written assignment
Criteria Accomplished (A) Proficient (B) Partially proficient (C) Borderline (D) Fail (F) Problem identification
The business issue has been correctly identified, with a competent and comprehensive explanation of key driving forces and considerations. Impact on company operations has been correctly identified. Thorough analysis of the issue is presented.
The student correctly identified the issue(s), taking into account a variety of environmental and contextual drivers. Key case information has been identified and analyzed.
The student correctly identified the case (issues), considering obvious environmental/contextual drivers. There is evidence of analysis, but it lacks depth.
The student correctly identified the issue(s) but analysis was weak. An absence of context – the work is basically descriptive with little analysis.
The student failed to correctly identify the issue(s); analysis was incorrect or too superficial to be of use; information was misinterpreted.
Information gathering
The student showed skill in gathering information and analyzing it for the purposes of filling the information gaps identified. Comprehensive and relevant.
Relevant information gaps were identified and additional relevant information was found to fill them. At least two different types of sources were used. The student demonstrates coherent criteria for selecting information but needs greater depth.
The student correctly identified at least one information gap and found relevant information, but which was limited in scope. Some evidence of sound criteria for selecting information but not consistent throughout. Needs expansion.
An information gap was identified and the student found additional information to fill it. However, this was limited in scope. Weak criteria for the selection of necessary information.
Information was taken at face value with no questioning of its relevance or value. Gaps in the information were not identified or were incorrect.
Conclusions The student evaluated, analyzed, synthesized all information provided to create a perceptive set of conclusions to support the decisions and solutions.
The student evaluated, analyzed and synthesized to create a conclusion(s) which support decisions and solutions.
The student reached conclusions, but they were limited and provided minimal direction for decision-making and solutions.
The conclusion was reasonable but lacked depth and would not be a basis for suitable strategy development.
The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand.
Solutions The student used problem solving techniques to make thoughtful, justified decisions about difficult and conflicting issues. A realistic solution was chosen which would provide maximum benefit to the company. Alternative solutions were explored and ruled out.
The student used problem solving techniques to make appropriate decisions about complex issues. Relevant questions were asked and answered. A realistic solution was chosen. Alternatives were identified, explored and ruled out.
The student used problem- solving techniques to make appropriate decisions about simpler issues. The solution has limited benefit but does show understanding of implications of the decision. Alternatives were mentioned but not explored.
The student used problem solving techniques to make decisions about simpler issues but disregarded more complex issues. Implications of the decision were not considered. Alternatives were not offered.
The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand
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