Harvard University Summer School

Business Analysis & ValuationMGMT S-2620Case Questions

Version June 28 2012

Professors: Viktoria Dalko, PhD. Daniel C. Deneffe, PhD.

This is a team assignment, 4 people in each team. You should form your own team before preparing and submitting the first written assignment.

Please upload your answers to the following question before the class begins, and bring a hard copy to class. The due dates are in your syllabus as well as on the course web page. In case of conflict between these two, follow the course web page drop box deadlines.

The case write ups in general should be 3-4 pages single spaced, plus exhibits, unless noted otherwise. Answer only the listed questions specifically, and in the order stated. Bring a hard copy to class so that you can consult it during our discussion.

The role of capital market intermediaries in the dot-com crash of 20001. List the ideal role of each financial intermediary 2. What are their respective financial interests?3. How can you align their interest with their ideal role?

Wal-Mart Stores, Inc.1. How attractive was the discount retailing market at the time of Wal-Mart’s entry?

(max ½ page)2. What, historically, has been Wal-Mart's key source of competitive advantage in

discount retailing? (max 1 page)3. How sustainable will Wal-Mart's advantage be in the future? (max ½ page)

Wal-Mart 20111. Which of Wal-Mart’s advantages are transferable into new formats and

especially into new international locations? (max ½ page)2. Which advantages are unlikely to work overseas? (max ½ page)3. How does your analysis in both cases affect your forecast of Wal-Mart’s

future profitability? (max 1 page)

Monsanto CompanyBelow are the questions for the Monsanto case write-up. Be prepared to present your results (including the excel sheet) to the class.

1. What are the principal challenges facing Monsanto, both in the short term (1 year) and in the medium to long term (3 to 5 years)? (max 1 page)

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2. Please complete the forecast for the 2009 income statement in worksheet 1 (please fill out in excel) of the uploaded document UVA-S-F-1597 (Monsanto Co).xls. As a starting point only, please review, challenge and update the sales forecast of Agrichem Equities Research (a fictitious investment banking firm). This company released 2009 forecasts for the 2 main product segments.

- Corn seeds and traits: 4.470 B$ - Roundup and other herbicides: 4708 B$

The research company did not release any other figures.3. Please clarify the underlying for each item on the income statement,

paying particular attention to the sales forecast (add an explanatory sheet to explain each item of the income statement)

4. Please also identify critical data gaps: What additional information would be important and feasible to gather to improve the quality of your forecast? (1 page max)

5. Please perform a sensitivity analysis to explore alternative assumptions and the sensitivity of your results to these assumptions.

Harnischfeger Corp.1. Identify all the accounting policy changes and accounting estimates that

Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company’s 1984 reported profits.

2. What do you think are the motives of Harnischfeger’s management in making the changes in its financial reporting policies? Do you think investors will see through these changes?

3. Assess the company’s future prospects, given your insights from the first two questions.

The Home Depot, Inc.1. Evaluate Home Depot’s business strategy. Do you think it is a viable strategy in

the long run?2. Analyze Home Depot’s financial performance during the fiscal years 1983-1985.

Compare Home Depot’s performance in this period with Hechinger’s performance. You may want to use the ratios and cash flow analysis in Exhibit 3 in this summary. You also need to use the BAV software and compare the results from the two methods.

3. How productive were Home Depot’s stores in the fiscal years 1983-1985? (You may want to use the statistics in Exhibit 1 in this analysis.)

This case will be discussed in class. Those students who missed the Ginny’s submission for any reason, will need to submit Home Depot in the New Millennium in writing, individually. Other students only present their models in class.

Home Depot in the New Millennium

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1. What is your most likely estimate of the intrinsic value of Home Depot’s stock as of February 1, 2001? You need to use the BAV software. Justify your assumptions based on your strategy analysis. Explain all forecast output from the BAV software. (Hint: focus on sales and nopat margin forecast, and try some capital market variables as different scenarios).

2. What set of assumptions regarding Home Depot’s future growth rate, return on equity, and cost of equity are consistent with its observed stock price of $48.20 on February 1, 2001? You need to use the BAV software. Justify your assumptions, and explain if you find those assumptions to be reasonable.

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