Suggested Format for Case Analyses:
1. Executive Summary: brief 1 paragraph stating key problem(s) and your main
2. Problem Identification: 1-2 page write-up of the key problem(s) you have identified
within the case. This should not be a re-hash of the case itself. The Case Study questions
should help you address the issues in this section.
3. Action Plan: 1-2 page write-up of your proposed solution to the problem(s) with
detailed steps as to how to proceed with implementing your proposal.
4. Financial Analysis: 1-2 page write-up of the financial analysis that supports the
recommendation(s) you have presented in the Executive Summary and Action Plan. Use
an electronic spreadsheet to do the calculations and print out these figures as an
attachment to your case analysis.
Case Study Questions:
Tiffany & Co.—1993:
1. Should Tiffany actively manage its yen-dollar exchange rate risk? Why or why
2. If Tiffany were to manage its exchange rate risk activity, then what should be the
objectives of such a program (e.g., what specific purpose or theoretical rationale
can justify a decision to hedge the yen-dollar risk)?
3. Assuming Tiffany wanted to hedge this risk, try to identify what exposures should
be managed via such a hedging program (e.g., hedge sales, net income, cash flow,
etc.). Also, try to quantify how much of these exposures should be covered and
for how long.
4. Identify, in terms of cost, benefits, and risk, the relative advantage / disadvantage
of the following three hedging strategies: a) do nothing, b) hedge with forward or
futures contracts, and c) hedge with option contracts.
Cephalon, Inc. (Mid-term Case and Group Presentation):
1. How much business and financial risk does Cephalon face? How do these risks
relate to each other? What factors might mitigate some of these risks?
2. Using the Black-Scholes option pricing model, is SBC’s option priced fairly for
3. How should Cephalon finance its projected cash needs in order to maximize
shareholder value? That is, what set of securities (and in what dollar amounts)
should the firm issue to maximize the firm’s value?
1. First, read the HBS Tutorials and then read the Arundel case to answer these and
the following questions: Why do the principals of Arundel Partners think they
can make money buying movie sequel rights? Why do the partners want to buy a
portfolio of rights in advance rather than negotiating film-by-film to buy them?
2. Estimate the per-film value of a portfolio of sequel rights such as Arundel
proposes to buy. [There are several ways to approach this problem, all of which
require some part of the data set in Exhibits 6-9. You may find it helpful to
consult the Appendix, which explains how these figures were prepared.] You can
use either DCF, real options, or both valuation techniques to answer this question.
3. What are the primary advantages and disadvantages of the approach you took to
valuing the rights? What further assistance or data would you require to refine
your estimate of the rights’ value?
Carrefour S.A. (Final Case Analysis):
1. Should Carrefour be pursuing an expansionary strategy financed by debt at this
time? That is, is the firm’s strategy likely to enhance shareholder value and, if so,
then is it acceptable for the firm to use debt to finance this expansion?
2. Assume for the rest of the questions that Carrefour wants to issue the bond
described in the case. In this situation, what currency should the firm issue its 10-
year, 750 million euro, annual coupon bond? Briefly explain/justify your choice.
3. What foreign currency risk exposure, if any, does your recommendation in #1
create (if any)? Please be specific about the most likely amount at risk during
each year of the bond’s life.
4. Should the firm hedge any or all of the risk identified in #2 above? Briefly
explain why or why not.
5. What hedging instruments, if any, should be used to hedge any possible bond-
related currency risk?
6. Based on the Smithson chapters, what market imperfections (if any) can be
reduced based on your response to #4 above? Briefly explain.
7. Briefly describe what operational risks and/or other non-financial risks the firm
faces if they decide to continue to increase their non-French revenues?