The Lotto Case (or Hitting the Jackpot)
Allen B. Atkins, Roxanne Stell, and Larry Watkins
Bob, Chad and Dylan had been dreaming of this day for the past six years; ever since they first met in an introductory economics course in college.  For several years they had been pooling their money and buying Arizona Lottery tickets dreaming that one day they would win big.  They realized that the lottery was considered by many to be a voluntary tax on the statistically challenged.  But miraculously they now sat at their favorite local “watering hole” holding the winning ticket that meant they would split “The Pick” jackpot of $6 million.  What a great feeling! Now they just needed to decide if they wanted to take their winnings as a lump sum now or to be paid over the next twenty in installments.

American Apparel, Inc. – Saved from Bankruptcy but can it Sustain?
Dr Anupam Mehta

American Apparel, Inc, which was once the fastest growing retailer of America, is now striving to save its bleeding bottom line. With the possible bankruptcy looming on the American Apparel heads and huge pile of loans to pay, it is battling to get on the operating profits necessary for its very existence. The present case depicts the struggle of founder and CEO Dov Charney to revive the company with his recovery mechanism, inventory management, strengthening online & offline sales and crushing operating expenses to fight against the quarter by quarter losses, negative EPS and decreasing margins. This case gives an opportunity to the students to analyze and evaluate the financially troubled company’s performance along with applying the Altman’s Z score. At the end of the case students need to decide: whether the CEO Dov Charney’s recovery plan is able to improve the financial performance of the company?  What are the trends of growth and earnings? Does the company have sufficient liquidity and profitability to meet the requirements of massive debt and gather refinance options? Does the company survive bankruptcy? 

A Model for Running an Undergraduate Business-Focused Case Competition
Jill M. Bale, Jimmy Senteza, and Toby A. White

A case competition complements the curricular objectives of various programs in this era of mission-driven business school accreditation.  We provide a model for conducting a case competition at a business school in a manner that integrates curriculum objectives with learning outcomes, and without imposing greatly on time constraints of faculty. Based on our experiences for running this competition for three years at a small, mid-western university, we recommend a four-phase sequential description of the process: planning, execution, assessment, and feedback. Even though the framework presented here is performed as an extra-curricular activity, with minor modifications, it can be integrated into an ongoing standard undergraduate-level course. 

Midwest Bancshares, Inc.
Heather Muehling and Edward C. Lawrence

Midwest Bancshares, Inc. (MBI) is a large multibank holding company located in Little Rock, Arkansas. In 2013, MBI is considering acquiring a small bank in St. Louis, Missouri by the name of Quality Bancshares. This is a very detailed case study based on real institutions that allows students to experience the difficulty of making bank merger or holding company acquisition decisions with missing and conflicting data. The case introduces three of major valuation methods for determining an appropriate price for acquisition. While the case does require some number crunching for valuation purposes, students should also be encouraged to go beyond the numbers and draw on their knowledge of organizational behavior and other functional areas of business in their analyses and recommendations. The case is intended for an advanced undergraduate or graduate course in Commercial Bank Management.

Creating Equity Indices: A Case Exercise
Judson W. Russell and Christopher Brockman

Brooks Hamilton is a recent college graduate who joins a regional money management firm.  His first assignment is to create a stock index based on local firms for his manager to include in her presentation to clients.  Eager to make a good first impression, Brooks reviews his college notes on price-weighted and market-weighted indices and then begins his work.  Along the way, he encounters stock splits and constituent changes and makes appropriate adjustments to his indices.  He provides a report to his manager and makes his recommendation on which index to use.

Netflix: DVD-by-Mail or Online Streaming?
Rick Long, Inchul Suh and Toby White

This case study requires students to analyze the issues surrounding the decision of Netflix to split its business into two different parts: Qwikster for its DVD-by-mail business and Netflix for its streaming business. The case offers students a chance to evaluate the strategic choices of top managers, as they respond to rapid changes in technology that impact how consumers access their entertainment content.   The case focuses on various aspects of equity valuation using the free cash flow model. Specifically, the case provides students an opportunity to explore the challenges of Netflix analysts when estimating the company’s cost of capital, subscriber growth rates, and content acquisition costs in the context of intensifying competition in the online streaming market.

Strategic Approach of Business Valuation
Dr. Rishma Vedd and Nataliya Yassinski

A comprehensive financial statement analysis and valuation framework that integrates strategy, industry, financial reporting, and business valuation draw an understanding of the company performance and provide a basis for making reasonable valuation estimates.  The fundamental financial statement analysis uses various tools and techniques for business valuation.  Topics include profitability analysis, evaluating sustainable growth, cash flow analysis and prospective analysis using various business valuation models such as income, market and cost approach.

Did Right Case Take a Wrong Turn?
Janet E. Mosebach and Diana R. Franz

This case uses a relatively simple yet relevant income tax issue, worker classification, to introduce students to the financial reporting issues surrounding uncertain tax positions (ASC 740-10; commonly known as FIN 48). Worker classification is not only a hot topic in the U.S., it is being raised in tax audits and labor courts around the world. While income tax regimes vary greatly around the globe, the factors used to determine whether a worker is an independent contractor or employees are quite similar. The financial reporting implications can be significant due to government-mandated employee benefits, penalties, and the retroactive nature of tax adjustments. This case can be used in an intermediate financial accounting or corporate income taxation course to demonstrate the issues surrounding ASC 740-10 and the computations necessary to record the liability associated with it. This case can also facilitate a discussion of Schedule UTP in a tax course.

Quandary at National Health Company
N. Ahadiat and D. Rice

National Health Company (NHC) became one of the nation’s leading providers of healthcare during the early 2000s, through aggressive mergers and acquisitions.  The company provides both in and out patient care such as convalescent care, rehabilitation, physical therapy, outpatient surgical centers, ultrasounds, mammograms, MRI’s, CT scans, and other medical services.  The company’s rapid expansion initially resulted in a substantial amount of profit and success in the healthcare market.  However it became increasingly difficult to maintain the growth and expansion in light of the economic climate, continued pressure from Medicare, the insurance companies to cut costs, competition from other health field carriers and the concern over potential government funded health care programs.  As the NHC’s management failed to sustain the expected growth, its management resorted to other strategies that not only maintained the expectation of its shareholders, but would also allow management to keep their extravagant life style.

Interest Charge Domestic International Sales Corporations - The remaining exporter tax benefit
Matthew Yost and Chris Bjornson

This article provides a brief history of the tax breaks given to exporters and explains how the Interest Charge Domestic International Sales Corporation is the last benefit remaining to exporters. A code section by code section analysis of the Interest Charge Domestic International Sales Corporation tax law is provided.  The article then explains what an Interest Charge Domestic International Sales Corporation is and how to use one to save on Unites States taxes.  The article provides examples of the ways the Interest Charge Domestic International Sales Corporation can save taxes through setting up a sales transaction or a commission transaction.   The article concludes with a brief discussion of the case law surrounding Interest Charge Domestic International Sales Corporation.

Generating Financial Statements using QuickBooks: A Group Project in Financial Accounting
Christopher Aquino and Lei Han

This case study introduces a QuickBooks project, which requires students in groups to use the software of QuickBooks to prepare journal entries and adjusting entries and to generate financial statements for a virtual company based on a list of hypothetical transactions. After finishing the bookkeeping task, each team is required to audit the financial records for another team. The project in this case study was designed for an introductory-level financial accounting class, which could be easily modified to accommodate the needs of higher level financial accounting classes such as intermediate, advanced, or government and not-for-profit accounting. The project helps students obtain real-world hands-on experience in journalizing transactions and reinforces the concepts of the accounting cycle and auditing functions by way of an active and collaborative learning experience.

Investing in a Brewpub: A Capital Budgeting Analysis
Elizabeth Webb Cooper

Two recent college graduates own a restaurant and want to decide whether to invest in a brewpub system, which would allow the pair to sell beer on tap to their customers. The business owners must complete a thorough cash flow analysis of their planned investment using the concepts of operating cash flows, working capital investment and capital expenditures. They need to have a keen understanding of relevant versus non-relevant cash flows. Further, they must use these cash flows in order to come up with the net present value (NPV) and internal rate of return (IRR) of the investment under different realistic business scenarios. The pair also must use sensitivity analysis to see how their investment decision may or may not change as a result of varying costs of capital. In the end, the pair needs to decide whether to invest in the brewpub in light of their full analysis.

New Mexico National Bank, a bank with growth in mind (A)
Dr. James F. Cotter

New Mexico National Bank is a bank with growth in mind.  Bobby Lowden, the CEO of the bank has grown the bank rapidly in the past and would like you to analyze the bank as well as offer suggestions about how he can grow the bank in the future.  New Mexico National Bank is particularly amazing because it is a bank on the move even in these turbulent times of 2010. 

A Case Study: Ethical Implications of friendly takeovers: A Financial Manager’s Story
Barbara Tarasovich

In 2001, Bernadette Michaels was promoted to her dream job, Finance Manager at Home and Personal Care Products, a global corporation based in the UK. As a Certified Management Accountant CMA® and a Certified Public Accountant (CPA), Bernadette was a trusted employee known for her attention to detail. In this new role, she would be responsible for integrating the financial and accounting functions related to all mergers and acquisitions. This meant that she should be responsible for setting the overall tone and direction for the integration of personnel, corporate cultures, financial processes and information technology systems that track and categorize the financial accounts of the company.  As an ethical person, Bernadette soon found herself unprepared for the different corporate cultures she would soon encounter. Often, the acquired firm’s approach to compliance with financial rules and regulations was at odds with what Bernadette believed was ethical and appropriate.

Teaching Notes are available to Faculty Members on request. Send a request toeditor@irjaf.com

International Research Journal of Applied Finance

(ISSN 2229-6891)Since 2010(Online + Print journal)