ENCANA CORPORATION THE COST OF CAPITAL

OBJECTIVES

This article basically deals with the cost of capital and there are two managers from service firms who
have several differences of opinion. Encana was basically a leading gas and oil producer in north America
it was created in 2002 through the merger of PAN CANADIAN ENERGY CORPORATION and ALBERT
ENERGY COMPANY. The newly amalgamated company’s focus on producing natural gas, crude oil, and
natural gas liquids.

PROBLEM

They basically want to calculate the cost of capital(WACC) of Encana corporation. One manager also
thinks that after we get the cost of capital we also calculate the net present value and internal rate of
return to evaluate the projects.

TIME VALUE OF MONEY: BUY VERSUS RENT DECISION

OBJECTIVES

This case basically related to take decision between buy and rent of condominium. Young was a lady
who mentions his financial considerations. As she also mentions that she planned to move house or
even to a larger penthouse condominium within 5 to 10 years even sooner if her job continued to work
out well.

PROBLEM

In order to complete financial analysis of the buy-versus rent decision, Young realized that her first task
would be to determine the required monthly mortgage payments. Next, she wanted to determine the
opportunity cost (on a monthly basis) of using the lump-sum required funds for condominium purchase.
She would then next able to determine additional monthly payments required to buy the condominium
compared to renting, including the opportunity cost. There are some other analytical tools in which we
take decision between buy and rent like NPV, IRR, PAYBACK etc.

WORLDWIDE PAPER COMPANY

OBJECTIVES

Lucky lang, the controller for the blue ridge mill, was considering the addition of the new on-site
Longwood wood yard.

PRIMARY BENEFITS

 Eliminates the need to purchase shortwood from an outside supplier (Shenandoah Mill).
 Creates the opportunity to sell shortwood on the open market as new market.
 Reduces operating cost and increases revenue.

PROBLEM

Whether the expected benefits were enough to justify the $18 million capital outlay plus the
incremental investment in working capital over the six-year life of the investment? For this they need to
calculate the WACC and freecashflows. They also need to calculate IRR and NPV for the Shortwood and
Longwood.

PORTFOLIO DIVERSIFICATION ENGIMA

OBJECTIVES

Kunal kaushesh, product manager with one of the leading insurance companies. As he invests his funds
in CNX BANK INDEX. And he is satisfied with his performance over the past three years. Now he was
thinking if he should invest in some other assets than what would be the consequences or what would
be the benefits he would get.

PROBLEM

Diversification is the problem in this case. As he wants to diversify his portfolio in GOLD. So we basically
want to measure the diversification is beneficial to him or not. For this we need to compare the old and
new portfolio. And for comparison we calculate the expected returns, standard deviations, covariance,
variance, beta etc.

FROZEN FOOD PRODUCTS: COST OF CAPITAL

OBJECTIVE:
The purpose of this report is to first give overview of the project, which is new product line of Frozen
food; secondly, to calculate free cash flows to the firm from the Frozen food project for next five years.
The report also covers the appropriate discount rate for FCFF, the Terminal value from the project, and
the project NPV & MIRR.
PROBLEM:
Maria is considering the possible expansion plan. For this expansion, Maria is analyzing the
opportunities in India as the demand of the processed food is rapidly growing in that country as she
feels that this is the right time for her firm to expand and to invest in the food market of India.
The proposed expansion plan will result in the possible export of the frozen food products; therefore,
the capacity of the company’s manufacturing will also have to expanded order to meet the demand in
India. Maria has worked in the projection of the future revenues and costs of the frozen food company,
for this purpose she has made the projected income statement and projected balance sheet of the
consecutive five years of the operation of the company.
WORKING CAPITAL: A SUMMARY OF RATIOS BY INDUSTRY

The case graphically presents various working capital ratios (days inventory outstanding, days sales
outstanding, days payables outstanding, cash conversion cycle, and operating cycle) over the 2009-
through-2012 period by industry and for specific well-known companies. Students are given the
opportunity to craft an intuitive story around the ratios they are given in the case. The case works well
as a supplement for classes on working capital management. It is designed to help students relate the
often difficult-to-grasp concepts around working capital and working capital ratios to industries and
companies that they are familiar with, using companies whose business models and business practices
are particularly good illustrations of the relevant concepts
 SHENZHEN JIT TECHNOLOGY: ACCOUNT RECIEVABLE MANAGEMENT ISSUES

ABSTRACT

In March 2012, the president of Shenzhen JIT Technology Co., Ltd., a small electronics manufacturing
company in Shenzhen, China, was facing a problem with the company's uncollected accounts
receivables (AR). The company had a high level of AR, and the time it was taking to settle these accounts
was much longer than the industry average, which had led to financial difficulties. The company had
formalized its sales commission structure to include a system of rewards and penalties related to the
collection of outstanding AR payments, but these new rules had not solved the AR problem. The
president needed answers: What was the main reason for the company's high AR and receivable
turnover? What was wrong with its AR policy? What specific approach for quantity management of AR
would resolve these issues?

ALEX SHARPE'S PORTFOLIO

OBJECTIVE:

The purpose of this case study was to generate better understanding about the relationship which exist
between risk and return and CAPM. To understand and quantify the risks associated with individual
stock and portfolio.

PROBLEM IDENTIFICATION:

Alex Sharpe a risk averse investor who had invested her children savings in vanguard 500 index fund, but
she is not sure that she will receive high return or not, she want to invest where return is high and risk is
low for this she is narrowed down on two choices and she has to choose one. For this she should know
all necessary aspects regarding to both options before making any decision.

STRONG TIE LTD

OBJECTIVE

The purpose of this casestudy was to highlight the diversity of demand occuring in external
environment, factors which cause fluctuation in the market share of Strong tie ltd corporation, and to
understand how strategies should be implemented for maintaing the business competitve advantage
and status quo.

PROBLEM IDENTIFICATION

Strong Tie Ltd a corporation, which has been the leader in industry segment has lost 10% of its market
share and now its 60%. The corporation is also struggling to maintain its leadership due to competitors
(new competitors especially China) because of whom strong tie ltd lost its market place and shares. It is
important to compare the previous strategies which the corporation was implementing for sustaining
competitive advantage and analysis of the external market should be foremost point before making new
strategies.

VALUING WAL-MART 2010

OBJECTIVE

The main objective of this study was to determine the stock value which will in return aid in decision
making process. Understanding the valuation of stock based on estimation of various parameters and
models. How different models can help to calculate the value of stock.

PROBLEM IDENTIFICATION

Samina Gupta an investment advisor who is considering the stock of wal-mart in order to help client, but
she is not able to decide either she should recommend the wal-mart stock to the clients or not because
she don't know the valuation of wal-mart stock. To know the valuation to stock she wil use 5 models
whic are following:-

1. DDM

2. Two-stage DDM

3. Three- stage DDM

4. FCFE

5.P/E ratio