SUBJECT AREAS: Capital budgeting, Decision trees, Investments, Present value, ValuationCASE SETTINGS: Pharmaceutical industry; Fortune 500; $33 billion revenues; 1999This explores the valuation of an opportunity to license a compound before it enters clinical trials. Describes Merck's decision tree...

SUBJECT AREAS: Capital, Financial managementCASE SETTINGS: Round Rock, TX; High technology; 1997Dell Computer Corp. manufactures, sells, and services personal computers. The company markets its computers directly to its customers and builds computers after receiving a customer order. This...

SUBJECT AREAS: Cash flow, Financial analysis, Present value, ValuationCASE SETTINGS: Boston, MA; Fitness industry; $22 million revenues; 2000Health Development Corp. (HDC) owns and operates health clubs in the Greater Boston area. HDC engaged a local investment banker to explore a sale of the...

SUBJECT AREAS: Acquisitions, Mergers, Present value, ValuationCASE SETTINGS: District of Columbia; Radio; $81.7 million revenues; 1999Radio One (NYSE: ROIA and RIOAK), the largest radio group targeting African-Americans in the country, had the opportunity to acquire 12 urban stations in the top...

Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are...

This paper develops a rule for calculating a discount rate to value risky projects. The rule assumes that asset risk can be measured by a single index (e.g., beta), but makes no other assumptions about specific forms of the asset pricing model. It treats all projects as combinations of two...

We examine the post-acquisition operating performance of merged firms using a sample of the 50 largest mergers between U.S. public industrial firms completed in the period 1979 to 1983. The results indicate that merged firms have significant improvement in asset productivity relative to their...

Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are...

This issue of the Journal of Financial Economics contains the first set of studies in the new Clinical Papers section. The objective of this section is to provide a high-quality professional outlet for scholarly studies of specific cases, events, practices, and specialized applications. By...

This paper presents the Capital Cash Flow (CCF) method for valuing risky cash flows. I show that the CCF method is equivalent to discounting Free Cash Flows (FCF) by the weighted average cost of capital. Because the interest tax shields are included in the cash flows, the CCF approach is easier...