In early 1997, Cephalon, Inc., a biotechnology firm, purchased 2.5 million capped call options on its own stock, with a potential value of as much as $45 million, in exchange for $9.8 million worth of its common shares. Cephalon's first major drug, Myotrophin, was under review by the U.S. Food...

Cephalon Inc., a biotech firm, bought call options on its own stock to meet its conditional cash flow needs. We analyze this decision by using the cash flow hedging concepts of Froot et al., (1993. Journal of Finance 5, 1629-1658). We identify the managerial analyses necessary to apply this...

A major U.K.-based multinational is reevaluating its leverage policy as it restructures its business. The treasury team models the tradeoffs between the benefits and costs of debt financing, using Monte Carlo simulation to estimate the savings from the interest tax shields and expected financial...

This case focuses on how much external financing a firm needs and what securities the firm should issue to raise this financing. Cox Communications is a major player in the cable industry, which is consolidating due to technological changes/capabilities brought about by the Internet. The...

Sally Jameson has a large block of appreciated stock, which she is contemplating selling to purchase a home. She is comparing an outright sale, borrowing against the stock, shorting against the box, and a stock loan proposed by a small financial services firm.

Savings bonds have always served multiple objectives: funding the U.S. government, democratizing national financing, and enabling families to save. Increasingly, the authors write, that last goal has been ignored. A series of efficiency measures introduced in 2003 make these bonds less...

We examine the information flow for four stocks over seven months to trace the relationship between on-line discussion, news activity, and stock price movements. On-line discussions support numerous unsubstantiated rumors, substantial on-point exchanges, and quick dissemination of imminent and...

Most mutual funds use day-old fund holdings but current-day prices to calculate net asset values. This practice, sanctioned under SEC Rule 2a-4, results in deviations between reported net asset values (NAVs) and returns and the economic values of those quantities. Using a sample of 26 funds'...

Using a new database, we document the determinants of involuntary consumer bank account closures. During 2001–2005, approximately 30 million debit accounts were involuntarily closed for excessive overdrafting. We focus on multiple factors to explain this phenomenon: household economics and...

This paper reports the results of a 2007 experiment testing whether specific process simplification can foster increased take-up rates for savings products, particularly by low-to-moderate income (LMI) households. Tax refund recipients at certain H&R Block tax preparation offices were given the...