Financial Case Study

Treat the case as a business case with a finance emphasis. Write from the perspective of a consultant to the firms management, advising how to optimize the owners wealth. The marketing, operations and other management aspects are important. About half the grade is on the qualitative analysis. Always approach the case from the perspective of a financial management perspective, despite some cases seeming to emphasize a financial institution’s perspective.

Continental Carriers
•Your numerical analysis should be along the lines of Tables 9.2-9.3
•A good scenario format is: [a] one optimistic operating scenario with CATO per share under SEO, and then under debt, and then under convertible exercised plus [b] one pessimistic operating scenario with CATO per share under SEO, and then under debt, and then under convertible with no exercise.
•Use the supplemental financial statements provided by your beloved professor
•Replace the nonsense about a preferred stock issuance with a potential convertible debt issuance at 7.5% coupon. Each $1,000 bond would have a conversion ratio of 42 shares. Principal payment, if needed, would be a balloon in 15 years. The first possible call would be in year 1 at a call price of $1075 — the call premium decreases by $5 per year.
•What is the primary source of “dilution” in the common stock financing sub-case?
•For this kind of analysis, set all operating costs as variable
•Inflation rate = 0.05

Write cases in standard English prose (paragraphs and sentences).

Exclude repetition of material from the casebook.

The only limit only the number of tables/graphs is discretion. Give a descriptive label for each
table/graph. Put your assumptions in a table rather than in your write up. Write at least one paragraph in your write up on each scenario/table. Describe what the scenario models, how likely it is and which numbers are the most important. Interpret the important numbers. Exclude technical reviews saying how you divided A by B to get C or how you hacked up the “v.”

Single-scenario solutions are penalized by a minimum of one letter grade. You should always test your spreadsheet to see how changes in risky variables change the output data. A good way to beat the plagiarism problem is to develop and discuss the spreadsheet model of a case, and then to go your separate ways and prepare and write up scenarios on your own.

In the last paragraph, unequivocally state and defend your recommendations. Conceptually, a recommendation cannot be a scenario.

There is also a excel spreadsheet analysis (cost of capital) needed for this report for each scenario. I need the written report to be at least 5 pages so if there is additional cost for the spreadsheets or if it is not possible for you to complete them please let me know. Thank you.

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