TN40_MoGen_Inc_
29 Pages

TN40_MoGen_Inc_

Course Number: FINANCE 101, Spring 2012

College/University: University of...

Word Count: 8549

Rating:

Document Preview

CASE 40 MOGEN, INC. Teaching Note Synopsis and Objectives In 2006, Merrill Lynch became the lead book runner for a $5 billion convertible bond issue for MoGen, Inc. This was the single, largest convertible bond issuance in history and required a considerable amount of effort on the part of Merrill Lynchs Equity Derivatives Group to convince MoGens management to choose Merrill Lynch over its competitors. The case...

Unformatted Document Excerpt
Coursehero >> Texas >> University of Houston-Victoria >> FINANCE 101

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

40 MOGEN, CASE INC. Teaching Note Synopsis and Objectives In 2006, Merrill Lynch became the lead book runner for a $5 billion convertible bond issue for MoGen, Inc. This was the single, largest convertible bond issuance in history and required a considerable amount of effort on the part of Merrill Lynchs Equity Derivatives Group to convince MoGens management to choose Merrill Lynch over its competitors. The case is focused on Merrill Lynchs choice of the conversion premium and coupon rate to propose to MoGen management. This pricing decision requires students understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. Valuing the conversion option as a call option requires the estimation of the Black-Scholes model, with the volatility being a particularly challenging input. On a strategic level, the case introduces students to the concept of matching a companys business risk with the type of financing: equity, debt, or convertible debt. In that regard, MoGen presents the interesting financial challenge of needing a significant amount of funds for 2006 for a variety of uses, but particularly for its share repurchase plan, which was estimated as $3.5 billion for 2006. The case is designed for students who already have a basic knowledge of bond valuation and option-pricing principles. Because the case touches on both technical and strategic issues, it works well with undergraduate, MBA, and executive education audiences. The instructor may choose to teach the case in one class period or two. For a one-class experience, Exhibit TN1 serves as the epilogue to hand out at the end of class, whereas for a two-class experience Exhibit TN1 serves as a handout and the beginning point for an assignment for the following class. When taught over two classes, the second class deals with the financial-engineering issues associated with using derivatives to increase MoGens conversion premium from 11% (the actual premium) to 50%. Thus, the second class provides a strong reinforcement of option-pricing principles by demonstrating how an investment bank can reconstruct a security by taking long or short positions in puts or call options. This teaching note was written by Professor Kenneth M. Eades. Copyright 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation. 4 Case 40 MoGen, Inc. Suggested Questions for Advance Assignment For a one-class teaching plan: 1. How important is it for MoGen to get $5 billion of external funding in 2006? Could the company cut back on its share repurchase program, for example, to reduce the funds needed? 2. What are the pros and cons of issuing convertible debt via straight debt or equity? 3. The case states a convertible bond can be valued as the sum of a straight bond plus a call option. Starting with the current stock price of $77.98 per share, how can you use the Black-Scholes model to estimate the value of the conversion option with a 25% conversion premium for one share of MoGen stock? Be prepared to explain your choice for the stock price, exercise price, risk-free rate, time to maturity, dividend yield, and volatility. How should you convert this option value per share into to the option value for a bond with $1,000 face value? 4. What is the value of the straight bond component? What coupon rate should Manaavi propose in order for the convert to sell at exactly $1,000 per bond? What discount rate did you use to value the straight bond component? Conceptually, what should happen to the coupon rate if Manaavi were to propose a 15% conversion premium? a 40% conversion premium? 5. As MoGens CEO, what do like and not like about this proposal from Merrill Lynch? In particular, do you like the 25% conversion premium? the coupon rate? For a two-class teaching plan, the following questions can be distributed along with Exhibit TN1: 1. Using the actual terms for the 2011 and 2013 notes, compute the respective straight bond values and conversion option values to verify that they sum to $1,000 per bond. What implied volatility do you find for the 2011 notes? What about for the 2013 notes? 2. How could Merrill Lynch use financial engineering to change the conversion premiums of the 2011 and 2013 notes to 50%? (Hint: Think about what financial engineering MoGen would need to do to change the convertible bond into a straight one. In other words, what transaction when combined with the convertible would effectively remove the conversion option component to create a financially engineered straight bond? Then as a second step, think about what could be done to change the straight bond into the equivalent of a convertible bond with a 50% conversion premium.) 3. How much do you estimate this sort of transaction would cost MoGen? Why take this approach as opposed to simply designing the issue with a 50% conversion premium in the first place? Case 40 MoGen, Inc. 5 Supporting Microsoft Excel Spreadsheet Files For students: Case_40.xls For instructors: TN_40.xls Please do not share the instructors file with students. Hypothetical Teaching Plans The following questions form a teaching plan for one 85-minute class. 1. How would you describe MoGens business model and current operating environment? (10 minutes) This question helps set the background for students to ultimately think about MoGens choice of financing in terms of the underlying business risk of a company. It is important to establish a solid understanding of the business before addressing the task of how to finance it. The biotech industry relies heavily upon research and development (R&D), as well as the ability to get a new drug to market. Both activities have significant risks that are endemic to biotech businesses. Students will often mention MoGens share repurchase program during this discussion, which serves as a transition to discussing MoGens financing strategy. 2. How would you describe MoGens financing strategy? (10 minutes) Students should see that the risks of the biotech business are driving all of MoGens financial decisions: debt policy, dividend policy, and share repurchase program. Debt is relatively low because higher debt levels would result in debt rating decreases and therefore higher interest rates. Similarly, the company chooses to pay no dividends because of the risk of being forced to cut the dividend during the difficult times that invariably arise in a biotech business. Students should realize that a share repurchase program is a very good match for a biotech company like MoGen. The company can distribute cash to its shareholders when profits allow, but without making an explicit (debt) or implicit (dividends) promise to the market. 3. What are MoGens uses of funds for 2006? How important is the share repurchase program to MoGens choice to issue a convertible bond? (10 minutes) This question is designed to focus the class on the share repurchase program as a critical use of funds for 2006. The primary advantage of share repurchases using dividends is that management can turn share repurchases off and on as allowed by cash flow. The other projected uses of funds, however, are largely driven by business issues that are not as flexible for management. Students should notice that most of the $5 billion raised will be used to repurchase shares ($3.5 billion). Thus, MoGen could significantly reduce its funding needs by postponing the share repurchases and possibly fund the remaining shortfall with straight debt. If MoGen management continues with the share repurchase 6 Case 40 MoGen, Inc. plan, however, students should see several advantages of using the convertible bond as MoGens funding choice. 4. How can we use the Black-Scholes pricing model to value the conversion option component of the convertible? (20 minutes) Much of the class time will be devoted to the technical aspect of pricing the convertible and, in particular, to choosing the correct input values for the Black-Scholes pricing model to estimate the value of the conversion option. A key conceptual point will be valuing the conversion option at the bond level, rather than at the share level. Other key points of emphasis will be the estimation of volatility and translation of the conversion premium into the stock price and exercise price. 5. What coupon rate did you get for a 25% conversion premium? (20 minutes) This question relates to the second step in valuing the convertible: solving for the coupon rate on the straight bond component such that the total value of the convertible sums to $1,000 per bond. A key point of emphasis will be the discount rate used to value the bond cash flows. Students may be surprised at how low the coupon rate is, relative to the discount rate of 5.75%. The instructor may also want to ask for the coupon rate for a different conversion premium to reinforce the pricing concept. 6. Epilogue. (10 minutes) The instructor should end the class by distributing copies of Exhibit TN1. Discussion points will center on the actual terms of MoGens deal with particular emphasis upon the low conversion premiums and coupon rates. The instructor can conclude the class with a discussion about how Merrill Lynch was able to alter the effective conversion premium by having MoGen buy and sell warrants with differing strike prices. Exhibit TN2 is designed as a handout to show how Merrill Lynch designed this bond hedge plus warrant transaction. The following questions form a teaching plan for two 85-minute classes. Day one 1. How would you describe MoGens business model and current operating environment? (10 minutes) 2. How would you describe MoGens financing strategy? (10 minutes) 3. What are MoGens uses of funds for 2006? How important is the share repurchase program to MoGens choice to issue a convertible bond? (10 minutes) 4. How can we use the Black-Scholes pricing model to value the conversion option component of the convertible? (20 minutes) 5. What coupon rate did you get for a 25% conversion premium? (Optional: For a 15% premium? for a 40% premium?) (20 minutes) 6. Epilogue. (10 minutes) Case 40 MoGen, Inc. 7 The instructor should end the class by distributing copies of Exhibit TN1 as the focal point to discuss the actual terms of MoGens deal with particular emphasis on the low conversion premium. Then, the instructor should distribute study Questions 5 and 6 as the structure for the second class. Day two 1. Why did MoGen agree to issue a convertible with the wrong terms? (10 minutes) This question prompts the students to think about the big picture for security issuance before addressing the many technical pricing issues. The terms in Exhibit TN1 were offered, because Merrill Lynch viewed them as the sweet spot in the convertible market, the terms that would attract the most interest and therefore the best price for MoGen. Merrill Lynch also knew that it could use derivatives to change the terms for MoGen, so that it was viewed as a two-step process from the beginning. 2. Does it appear that Merrill Lynch priced the 2011 and 2013 notes appropriately? (15 minutes) The actual terms of the convertible were noticeably different than what was proposed in the case. MoGens stock price had fallen to $71.93, the coupon rates were lower, and the conversion premiums were substantially lower. All of which makes it a valuable exercise to run through the pricing of the 2011 and 2013 notes to reinforce the pricing principles from class one. Students will be pleased to see that the bond-plus-option framework works well for the actual terms and, in particular, that the implied volatility for the 2011 and 2013 notes is very close to the value derived in the first class. 3. How can we change MoGens financially engineered straight bond into a convertible bond with a 50% conversion premium? (20 minutes) A good way to begin this analysis is to remind the students that a convertible can be valued as the sum of a straight bond plus a warrant/option. Therefore, for each convertible bond issued by MoGen, the company is short a bond and short a bundle of call options. The short options can be nullified, if MoGen buys call options with the same terms (exercise price and maturity). The combination of the convertible plus the call options is equivalent to having issued a straight bond. Finally, a new synthetic convertible can be created by MoGen selling warrants with a strike price set at a 50% conversion premium; which is to say, 50% higher than the stock price at time of issuance. The instructor may choose to frame the discussion with the use of payoff diagrams to illustrate the financial engineering. 4. How much should MoGen pay to buy the call options? How much should MoGen realize from the sale of the warrants? (20 minutes) Understanding the concepts behind the hedge is important, but the pricing is the key to seeing that there is no free lunch for MoGen. No matter how it is done, MoGen ultimately must pay for the higher conversion premium. Using the Black-Scholes model, the class 8 Case 40 MoGen, Inc. will see that the cost of buying the call options is higher than the value received from selling the warrants (assuming the same number of equivalent shares). 5. What are the critical assumptions embedded in this deal? (10 minutes) This question asks students to think about the basic valuation framework as well as the key value drivers of the deal. While it is a good approximation to model a convertible as straight debt plus an option component, the Black-Scholes model does not consider issues, such as the dilution effect and the call feature of the bond. Moreover, the option component makes volatility a key value driver for the model that needs careful scrutiny. 6. Epilogue. (10 minutes) Exhibit TN2 explains how Merrill Lynch implemented the bond hedge and warrant transactions. Case Analysis for One-Class Plan This section adds detail to the one-class teaching plan outlined above. MoGens business model Discussion Question 1 As part of the biotech industry, MoGen had a variety of inherent risks that should be evident to the students: drug discovery, drug approval, and harvesting the value of existing drugs. Biotech and pharmaceutical companies spend billions of dollars on R&D on the theory that a small percentage of the R&D will produce highly lucrative results. In truth, many of the highest value drugs had been discovered somewhat accidentally, while pursuing a different line of research.1 The FDA approval process was expensive and often stretched over years, and there was a possibility that the drug might not be approved at any point in the process. And finally, the revenues reaped from successful drugs carried the risk of competition from biosimilars. MoGen appears to have had a successful strategy for managing its business risks. The company was carrying a large R&D portfolio, as well as many highly successful drugs already on the market. The company planned to invest in its production capabilities in Puerto Rico as well as build new facilities in Ireland. In addition to its R&D efforts, MoGen was active in the market to acquire smaller biotech companies in addition to licensing the rights to produce and market drugs from independent sources. MoGens financial policies 1 Viagra, for example, was originally developed for cardiovascular diseases before being marketed by Pfizer for erectile dysfunction. Case 40 MoGen, Inc. 9 Discussion Question 2 MoGens financial policies were driven by its business risks. The uncertainty of its profits kept debt levels relatively low and had also kept management from declaring a dividend. As an alternative mechanism for returning cash to its shareholders, MoGen had implemented a share repurchase program over the past few years. Students should recognize that the share repurchase programs were a key financial strategy for MoGen. The company had spent over $10 billion over the previous three years for various share repurchase programs and had $6.5 billion remaining in its current program, of which $3.5 billion was expected to be spent in 2006. Uses of funds for 2006 Discussion Question 3 The various uses of funds presented in the case highlight the capital-intensive nature of the biotech industry. Money was needed for R&D, the drug approval process, acquisition of new technologies, and investment in production facilities. All of those cash flow uses were associated with remaining competitive within the biotech industry. MoGen could potentially postpone some of the expenditures, but each likely had a positive net present value (NPV) such that changes in these plans would probably be greeted unfavorably by the stock market. In addition to its operational needs, MoGen had a substantive financial use of funds in the form of the stock repurchase program. Relative to the operational uses of funds, the repurchase program was more discretionary as postponing or reducing the share repurchases would not compromise MoGens fundamental business strategy. It could, however, result in a share price decline, given that the market was probably expecting a significant repurchase for 2006 based on MoGens track record for 2003 to 2005. To eliminate the repurchases for 2006 would signal a change in managements view that MoGen stock represented a good buy; which is to say that the stock price was no longer at an attractive level to purchase. Such news would almost certainly prompt a fall in the stock price and could compromise the pricing of the convertible if investors were to worry about future price support for the stock from MoGen. MoGen could avoid the issue altogether, if sufficient uses of funds could be eliminated. For example, if the company could postpone the capital expenditures for production scale up ($1 billion) and postpone the projected share repurchases ($3.5 billion), MoGen could avoid issuing new securities for 2006. Most students will argue, however, that MoGen had set an expectation regarding share repurchases over the past three years and that the investment in production sounds like a reasonable proposal that was almost certainly a positive NPV and therefore should be undertaken. Many students will also argue that share repurchases add value to MoGen 10 Case 40 MoGen, Inc. shareholders by reducing the shares outstanding and propping up earnings per share (EPS). Managing the number of shares outstanding could become more important if MoGens outstanding convertible of $1.8 billion (case Exhibit 5) were to be converted at a future date. MoGen had alternatives for raising external funds including straight debt and common stock. Neither of those alternatives, however, was as compatible with the share repurchase program as the convertible. Straight debt would have offered the advantage of simplicity plus the tax savings associated with the interest payments. It also carried the risk of prompting a lower debt rating as well as the increased risk of financial distress, particularly for a biotech company like MoGen. Based on data for public corporations, issuing common stock is typically the least likely source of funds chosen. Issuing common stock, however, would reduce MoGens financial leverage and increase its financial slack for future debt offering. Case Exhibit 4 shows that MoGens stock had just recently rebounded to outperform the S&P500. Thus, management would prefer to postpone selling stock until it had appreciated more during the next few years. Moreover, incurring the issuance costs associated with a stock offering only to turn around and use the funds to repurchase shares was not a logical financing strategy. MoGen was probably attracted to convertible debt as low-cost debt that could neutralize much of the dilution effect by using the proceeds to repurchase shares immediately. This strategy was becoming popular at the time in part because of the very low coupon rates that companies could get on the convertible debt while at the same time selling forward the companys stock at a premium price. That was music to the ears of MoGens senior management. Pricing the conversion option Discussion Question 4 This is an exercise in using the Black-Scholes model to price a call option using inputs that correspond to the terms of the convertible bond. A good structure for this part of the class is to simply list the input variables for Black-Scholes and go through each in order for the convertible. Students will likely begin with MoGens stock price of $77.98 as the underlying asset value of the option. Many students, however, will have difficulty translating the per-share call option value to the value of the conversion option for a $1,000 bond. Students will eventually recognize that the conversion price can be used to find the number of shares per bond received upon conversion. A key lesson of the case is the ability to use the model at the correct scale; i.e., either to value a bundle of options within a bond or to value a single option. Exhibit TN3 shows the option calculations both on a per-share basis and on a per-bond basis. As students suggest values for each of the inputs for the Black-Scholes model, the instructor can record the values on the board to create something like Exhibit TN3. Considerable discussion can ensue for any and all of the input values, but students usually realize that volatility is critical to the option value while at the same time being the most difficult input to Case 40 MoGen, Inc. 11 estimate. The choices are to use either the historical volatility of 27% or an implied volatility from MoGens traded options. Exhibit TN4 shows the implied volatilities to be about 23% for the long-term call options. Students usually agree that the implied volatilities are more reliable than historical values as they are derived from market prices that are forward-looking. Students should also agree that the longer maturity call options give more appropriate estimates than the short-term options, since Maanavis task is to price a five-year option. 12 Case 40 MoGen, Inc. Pricing the straight bond and the convertible Discussion Question 5 The straight debt valuation is presented in Exhibit TN5. Since the maturity (five years) and face value ($1,000) are known, we only need the coupon rate and appropriate discount rate to estimate the value of the straight debt. Maanavis task is to set the coupon rate such that the convertible will sell for full value; which is to say, $1,000 per bond. With the conversion premium estimated as $162, the coupon should be set so that the bond value equals the remaining value of $838. A key learning point is the appropriate discount rate to use for the bonds cash flows. Since MoGens outstanding debt has an A+ rating, we should assume that new debt would carry the same rating and hence, the same yield. The case states that the yield of A-rated corporate debt was 5.75%, a number that is very similar to the average A-rated yield reported in case Exhibit 6 of 5.79%. Using a discount rate of 5.75% will only give a bond value of $838 if the coupon rate is noticeably less than 5.75%. In fact, as shown in Exhibit TN5, a 1.96% coupon creates a debt value of $838, which when added to the conversion option value gives $1,000. Students should recognize that the coupon rate would be set lower if the market perceived a higher volatility than 23%. For example, if the market believed the five-year volatility to be 24.5%, the same as estimated for the long-term puts, the conversion option value rises to $173 and the coupon rate would need to be lowered to 1.73%. Ultimately, it comes down to how badly investors want to own MoGens new convertibles. If demand is high, the price will rise such that investors are implicitly paying for a relatively high volatility. If demand is low, investors may be able to get the bonds at a low implied volatility. As time allows, the instructor may want to redo the pricing estimation using a 15% conversion premium to reinforce the pricing concepts. A 15% conversion premium has a conversion option value of $206 per bond, which implies a coupon rate of 0.95% to give a straight debt value of $794. Once again, students should see that the lower conversion premium is synonymous with the option being closer to the money and therefore carrying a higher value. As the option component is increased, the bond component must be decreased by lowering the coupon rate. This illustrates why convertibles have lower coupon rates than straight debt and why the convertible coupon could be extremely low if the conversion premium were also very low. Epilogue for One-Class Format To end the class the instructor should distribute Exhibit TN1 and discuss the actual terms of the deal. If there are investment bankers in the class, they will not be surprised that Merrill Case 40 MoGen, Inc. 13 Lynch proposed two tranches of $2.5 billion each. As of 2006, this was the largest convertible issue in history. It was easier to find sufficient demand for $2.5 billion of five-year converts and $2.5 billion of seven-year converts than for a single issue of $5 billion. Students may be surprised at Merrill Lynchs choice of low coupon rates and low conversion premiums. After some discussion and guessing as to why the issue was structured this way, the instructor should display or distribute Exhibit TN2 with the details of the bond hedge and warrant transactions. Depending on the time available the instructor can either appeal to intuition as to how the banker could change the conversion premium of the issue with these transactions or the instructor can quickly demonstrate with payoff diagrams how the call options created a straight bond and the warrants created a new convertible. The instructor should mention that after the all dust settled, MoGen effectively had sold a convertible with a 50% conversion premium. In addition, the tax law allowed MoGen to report an interest expense of 5.75% per year, because the U.S. Internal Revenue Service (IRS) viewed the hedged bond separately from the warrants, which allowed MoGen to report the interest cost at the market yield. Epilogue for Two-Class Format If the case is being taught over two class periods, the instructor should distribute Exhibit TN1 along with study Questions 5, 6, and 7 as the assignment for the following class period. Only a few minutes of class time will be needed to point out that Merrill Lynch structured the issue as two tranches, both of which had low coupons and low conversion premiums. Your task for the next class is to consider why Merrill Lynch structured the issue that way and how you could use financial engineering to create a convertible with a 50% conversion premium. Case Analysis for Two-Class Period This section adds detail to the second class period when the instructor is following the two-class teaching plan outlined above. Merits of the convertibles structure Discussion Question 1 for Class 2 This question is designed to help students put on their marketing hats as an investment banker. The I-banker is not just a technician who manipulates Black-Scholes models, but rather acts as the intermediary that sells a corporations securities to the marketplace. The key to a bankers success is knowing the market and its participants. Who wants convertible bonds from biotech companies? How much appetite does the market have for such issues at this point in 14 Case 40 MoGen, Inc. time? Where is the sweet spot of the market? How should MoGens convertible be structured to guarantee the highest demand and, hence, the best possible price for the client? Merrill Lynch answered those questions by structuring five-year and seven-year bonds with low conversion premiums. In 2006, those were the terms that Maanavi saw as the sweet spot of the market: where Merrill Lynch could most easily place the large issue at the most favorable price for MoGen. At the same time the conversion terms (cash for principal and choice of cash or shares for above principal) satisfied financial accounting standards (FAS) requirements for reporting the convertible using the treasury stock method, which was important to MoGen management. On the other hand, Maanavi knew that the low conversion premium would not please MoGens management who wanted the conversion premium to be as high as possible to reduce the dilution effect. Thus, Merrill Lynch proposed a two-step process whereby the low conversion premium of the original issued convertible would simultaneously be financially altered to look like a 50% premium to MoGen. Pricing of the 2011 and 2013 notes Discussion Question 2 for Class 2 The strength of the two-class teaching plan is that it allows for reinforcement of the pricing principles. Since MoGens stock price had changed by the time the actual issuance took place and the actual terms of the deal were different from the case facts, it is a useful exercise for the students to check for consistency of the pricing using the same format presented in Exhibits TN3 and TN5: Compute the conversion option value and the straight bond value. Exhibit TN6 summarizes the inputs for the conversion option values and straight debt values for the 2011 and 2013 notes. Although the stock price had dropped and the conversion premiums and coupon rates were lower than suggested in the case, the valuation framework is the same. Students should recognize that the discount rate for the bond cash flows remains as 5.75% regardless of the actual coupon rate chosen. The valuation demonstrates that what MoGen gave up in bond value, it gained in option value. Once it was decided to use a low conversion premium, which raised the option value, it was necessary to use a low coupon rate to lower the bond value and maintain a total value of $1,000. There are a couple of approaches the instructor could take with respect to the volatility assumption. For Exhibit TN6 the volatilities are reported as 25%, somewhat higher than implied by MoGens options as reported in Exhibit TN4 and used in Exhibit TN3. The 25% figure represents the volatility necessary to get a value of exactly $1,000 per bond. The fact that 25% gives $1,000 for both the 2011 and 2013 notes suggests that the number is consistent with how Merrill Lynch priced the issue. Alternatively, the instructor could also use a lower volatility such as used in Exhibit TN3. A lower volatility will give a lower conversion option and, hence, both Case 40 MoGen, Inc. 15 the 2011 and 2013 note value estimates will be below $1,000. At this point the instructor should take the opportunity to ask the class: Does it seems reasonable that the market would have paid a similar premium for both notes, or is it more reasonable to conclude that we have made a mistake with the model? This question presses the students to consider the merits of assuming the market to be inefficient, rather than assuming the volatility estimate as the likely culprit for the mispricing. It is important for students to trust that the 2011 and 2013 notes must be priced consistently in a well-functioning capital market. It is less important that students believe the 25% volatility number as the truth of the markets view of MoGens stock price uncertainty. The simple valuation approach of adding bond value to option value ignores call features, issue discounts, and other attributes of the notes that affect the market value of a convertible bond. Moreover, the plain vanilla Black-Scholes model is a rough cut at the conversion option value. Despite all those shortcomings in the valuation framework, however, the market prices of the 2011 and 2013 notes should be consistent in an efficient capital market. Financial engineering of the convertible Discussion Question 3 for Class 2 Financial engineering represents the key learning point for the class: A convertible bond is a derivative security that can be decomposed into its components for purposes of pricing, but also for purposes of financially engineering. In this case, Merrill Lynch could issue the convertible with any conversion premium that was most marketable at the time. Then, MoGen could nullify the conversion option of the convertible by purchasing call options with the same maturity and exercise price. From a trading-strategy viewpoint, MoGen would be short the convertible bonds and long the call options with a net obligation equivalent to a straight bond. Finally, by selling warrants with the same maturities, but with strike prices equal to 50% over the current market price, MoGen would have created a new convertible bond with a 50% conversion premium. If students are familiar with payoff diagrams, the instructor can easily demonstrate the financial-engineering concept. As shown in Figure 1, a convertible bond has a payoff equal to its face value as long as its conversion value is less than the face value of $1,000. Payoff at Maturity Figure 1. Convertible bond payoff to investors. $1,000 $0 $500 $1,000 $1,500 Conversion value (Stock price Conversion shares) 16 Case 40 MoGen, Inc. Case 40 MoGen, Inc. 17 Because MoGen has issued the convertible, the payoffs are negative (Figure 2). Figure 2. Convertible bond payoff to MoGen. Payoff at Maturity $0 $0 $500 $1,000 $1,500 Conversion value (Stock price Conversion shares) ($1,000) If MoGen purchases call options the upside potential of the calls (seen as the heavily dashed line) offsets the downside potential of the convertible (Figure 3). Figure 3. Convertible bond with call options. Call options Payoff at Maturity $0 $0 $500 $1,000 $1,500 Conversion value (Stock price Conversion shares) ($1,000) 18 Case 40 MoGen, Inc. The net exposure becomes a straight bond as represented by the irregularly dashed line (Figure 4). Figure 4. Convertible bond with call options. Payoff at Maturity Conversion value (Stock price Conversion shares) $0 $0 ($1,000) $500 $1,000 $1,500 Financially Engineered Straight Debt Selling warrants at a higher exercise price as shown in Figure 5. Figure 5. Straight debt with warrants. Payoff at Maturity Conversion value (Stock price Conversion shares) $0 $0 $500 $1,000 $1,500 Warrants ($1,000) Straight Debt with Warrants The final position for MoGen is conceptually equivalent to a convertible bond with a 50% conversion premium. Astute students will point out, however, that the financially engineered convertible does have different cash flows in different states of the world. For example, investors will need to pay the exercise price to MoGen in order to exercise the warrants. No such cash flow would have occurred for the original convertible. Students should Case 40 MoGen, Inc. 19 note that the warrants carry a higher conversion price and a lower number of conversion shares per bond than the original convertible. Therefore, in terms of the payoff diagram, the current conversion value of the financially engineered convertible is lower than the original convertible; which is to say that the 50% conversion premium means that investors are buying a conversion option that is further out of the money. Valuing the bond hedge and warrant transactions Discussion Question 4 for Class 2 The pricing of the bond hedge is straightforward. Hedging the bond amounts to simply offsetting the conversion option, which was already valued in Exhibit TN6 for the 2011 and 2013 notes. Moreover, the strike prices of the conversion options were already defined as $79.84 for the 2011 notes and $79.48 for the 2013 notes. Therefore, MoGen need only purchase the correct number of call options with those characteristics to offset the existing conversion option. This requires students to shift their thinking from pricing a bond as a bundle of stock options to valuing individual call options. Each convertible bond has a number of underlying shares available upon conversion. Even if bondholders are not entitled to receive shares, the cash received will be valued based on the conversion value, which is the conversion rate times the share price. For the 2011 notes, the conversion price of $79.84 translates into a conversion rate of 12.525 shares per bond. Because 2.5 million of the 2011 notes were issued, the total number of conversion options equals 31.312 million (2.5 million bonds 12.525 shares per bond). Therefore, MoGen should purchase 31.3 million call options with a maturity of five years and a strike price of $79.84. Some students will see immediately that whether we talk about the conversion options in terms of value per bond or value per share, the total value will be the same. The instructor may want to prove this with the calculations shown in Exhibit TN7 where the value of one call option is multiplied by 31.3 million to arrive at the same total option value as computed in Exhibit TN6. Exhibit TN8 computes the value of the warrant issuances. The warrants are chosen to have the same maturities as the notes: five and seven years. In fact, the only parameter that differs from the call options purchased by MoGen is the exercise price, which is set at a 50% premium over the current stock price. Students should notice that because MoGen is issuing warrants for the same number of shares, but with a higher exercise price, the combined value of the bond plus 12.5 warrants will fall short of $1,000 per bond. Exhibits TN9 shows that MoGens all-in cost for the bond hedge plus warrant issuance was $540 million, which means that the financially engineered convertible 20 Case 40 MoGen, Inc. provided net proceeds of about $4.5 billion to MoGen. MoGen could have issued more warrants to make up the difference, but that would have increased the potential share dilution. By keeping the dilution factor the same, MoGen was effectively buying call options with a low strike price and selling calls/warrants one-for-one, with a higher strike price. Critical assumptions Discussion Question 5 for Class 2 A variety of assumptions are necessary to conduct any analysis, but in this case the volatility assumption was critical to valuing the conversion options, the call options and the warrants. The volatility estimate is always important to option pricing, and it is always the least precisely measured of all the Black-Scholes inputs. In this case, the traded options gave implied volatilities that were close to the historical measure of volatility. It is often the case, however, that those estimates differ as the implied volatilities embody a forward-looking viewpoint, which can differ substantially from historical price variations. Some students might recognize that the Black-Scholes model is not a perfect fit for modeling the conversion option. In particular, Black-Scholes uses a risk-free rate, because the exercise price payment is considered to be riskless in the model. This fits well with the options market, where a clearinghouse demands that accounts post margin to significantly reduce counterparty risk. For a convertible bond where the face value is the exercise price, the face value is valued in the market according to the credit risk of the issuer. MoGen carried an A rating on its debt so that its debt carried a yield to maturity of 5.75% compared to 4.46% for five-year Treasury bonds. If we used MoGens cost of debt in lieu of the risk-free rate, Black-Scholes would have given a higher option value. The Black-Scholes model also neglects the dilution effect upon stock price. In fact, researchers have argued that the dilution effect, as well as the decision by investors of how and when to convert, would impact the market value of a warrant, making the valuation equation much more complex than the usual Black-Scholes model.2 Epilogue The instructor should use Exhibit TN2 as a handout to illustrate that the actual transactions implemented by Merrill Lynch corresponded to the analysis above. The actual cost to MoGen was higher than suggested by the analysis due to fees from Merrill Lynch, which won 75% of the bond hedge business in addition to being the lead book runner for the notes. 2 See, for example, David C. Emanuel, Warrant Valuation and Exercise Strategy, Journal of Financial Economics (August 1983). Case 40 MoGen, Inc. 21 In addition to the many advantages of the convertible described in the case and this note, the bond hedge created a tax advantage for MoGen. The IRS allowed issuers of convertibles to expense the interest cost for straight debt, if the convertible was fully hedged so that it acted like a straight bond. The tax law was silent about adding an additional derivative on top of the hedged convertible, which meant that the warrant issuance was irrelevant to MoGens ability to claim an annual interest charge equal to 5.750%, rather than the actual coupon rates of 0.125% and 0.375%. 22 Case 40 MoGen, Inc. Exhibit TN1 MOGEN, INC. Selected Terms of MoGen, Inc.s Convertible Senior Notes Notes offered $2,500,000,000 principal amount of 0.125% Convertible Senior Notes due 2011 and $2,500,000,000 principal amount of 0.375% Convertible Senior Notes due 2013. Interest & payment dates 0.125% per year, with respect to the 2011 notes, and 0.375% per year, with respect to the 2013 notes, in each case payable semiannually in arrears in cash on January 1 and July 1 of each year, beginning July 1, 2006. Conversion rights Holders will be able to convert their notes prior to the close of business on the business day before the stated maturity date based on the applicable conversion rate. The initial conversion rate for the 2011 notes is 12.525 shares of common stock per $1,000 principal amount of 2011 notes. This is equivalent to an initial conversion price of approximately $79.84 per share of common stock. The initial conversion rate for the 2013 notes is 12.581 shares of common stock per $1,000 principal amount of 2013 notes. This is equivalent to an initial conversion price of approximately $79.48 per share of common stock. Upon conversion, a holder will receive an amount in cash equal to the lesser of (i) the principal amount of the note, and (ii) the conversion value. If the conversion value exceeds the principal amount of the note on the conversion date, MoGen will deliver cash or common stock or a combination of cash and common stock for the conversion value in excess of $1,000. Ranking The notes will rank equal in right of payment to all of MoGens existing and future unsecured indebtedness and senior in right to payment to all of MoGens existing and future subordinated indebtedness. Use of proceeds We estimate that the net proceeds from this offering will be approximately $4.9 billion after deducting estimated discounts, commissions, and expenses. We intend to use (1) approximately $3.0 billion of the net proceeds from this offering on or about the closing date to purchase shares of our common stock under our common stock repurchase program, including through one or more block trades with one or more of the initial purchasers and/or their affiliates. The remaining net proceeds will be added to our working capital and will be used for general corporate purposes. CASE 40 Exhibit TN2 MOGEN, INC. MoGens Bond Hedge and Warrant Transactions MoGen issued two tranches of convertible debt (MoGen was selling at $71.93 per share): Gross proceeds ($ millions) Coupon rate Conversion premium Conversion price 2011 Notes $2,500 0.125% 11.0% $79.84 2013 Notes $2,500 0.375% 10.5% $79.48 MoGen removed the conversion option by purchasing call options on its own shares: Exercise price Number of shares (millions) 2011 Calls $79.84 31.312 2013 Calls $79.48 31.454 Warrants were sold with exercise prices of 50% over the market price: Exercise price Number of warrants (millions) 2011 Warrants $107.90 31.312 2013 Warrants $107.90 31.454 At the end of those transactions, MoGen had effectively issued a straight bond plus warrants. If investors chose to purchase a bond plus the appropriate number of warrants, they would own the equivalent of an MoGen convertible bond with a 50% conversion premium ($107.9/$71.93). MoGen paid $1.38 billion to buy the call options and netted approximately $860 million, selling the warrants for an all-in cost of $520 million to raise the conversion premium to 50% on $5 billion of bonds. This teaching note was written by Professor Kenneth M. Eades. Copyright 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation. 24 Case 40 MoGen, Inc. Exhibit TN3 MOGEN, INC. Conversion Option Value Maturity Current stock price Conversion premium Conversion price Conversion shares 5 years $77.98 25% $97.48 10.26 Black-Scholes Inputs per Share (no dividend, European option) S: Underlying asset price = Stock price = $77.98 X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = > Conversion price = $97.48 = > Five-year Treasury yield = 4.46% = > 23% (implied by call options: see Exhibit TN4) = 5.00 Call option value = Black-Scholes call value = $15.8 Conversion option value = call value per share shares per bond = $15.8 10.26 = $162.3 Black-Scholes Inputs per Bond (no dividend, European option) S: Underlying asset price = Stock price Conversion shares = Conversion value = $77.98 10.26 = $800 X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = > Face value of bond = $1,000 (25% conversion premium) = > Five-year Treasury yield = 4.46% = > 23% (implied by call options: see Exhibit TN4) = 5.00 Conversion option value = Black-Scholes call value = $162.3 Case 40 MoGen, Inc. Exhibit TN4 MOGEN, INC. Implied Volatilities of MoGens Put and Call Options (January 10, 2006, MoGen stock price = $77.98) Exercise Date Days to Exercise Maturity Price Closing Price Open Interest Implied Volume Volatility Call Call Call Call 04/22/2006 04/22/2006 01/20/2007 01/20/2007 102 102 375 375 $75 $80 $75 $80 $6.60 $3.85 $10.70 $7.75 3,677 6,444 6,974 9,790 52 98 143 3 27.5% 26.5% 23.5% 22.5% Put Put Put Put 04/22/2006 04/22/2006 01/20/2007 01/20/2007 102 102 375 375 $75 $80 $75 $80 $2.70 $5.00 $4.65 $6.90 9,529 8,512 5,175 4,380 10 5 10 0 27.5% 27.0% 24.5% 24.5% Black-Scholes Model: Example for January 20, 2007 $80 Call S: Underlying asset price X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration $77.98 $80.00 4.45% 22.5% 1.027 Call value $7.81 Using PutCall Parity Put value $6.26 25 26 Case 40 MoGen, Inc. Exhibit TN5 MOGEN, INC. Straight Debt Value and Convertible Bond Value Face value Coupon rate Discount rate $1,000 1.96% 5.75% (MoGens debt yieldsimilar to A-rated yield of 5.79%) Years => Coupon payments Face value Total cash flows Market value: coupons Market value: face value Market value: total 0.5 $9.85 $0.00 $9.85 1.0 $9.85 $0.00 $9.85 1.5 $9.85 $0.00 $9.85 2.0 $9.85 $0.00 $9.85 2.5 $9.85 $0.00 $9.85 3.0 $9.85 $0.00 $9.85 3.5 $9.85 $0.00 $9.85 4.0 $9.85 $0.00 $9.85 4.5 5.0 $9.85 $9.85 $0.00 $1,000.00 $9.85 $1,009.85 $85 $753 $838 Case 40 MoGen, Inc. Convertible bond value = Bond value + Conversion option value Convertible bond value = $838 + $162 Convertible bond value = $1,000 535 Case 40 MoGen, Inc. Exhibit TN6 MOGEN, INC. Valuing the 2011 and 2013 Convertible Notes 2011 Notes Maturity Coupon Current stock price Conversion premium Conversion price Conversion shares 5.00 0.125% $71.93 11% $79.84 12.525 Black-Scholes Inputs (no dividend, European option) S: Underlying asset price = Stock price Conversion shares = Conversion value = $71.93 12.525 = $901 X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration => Face value of bond = $1,000 (11% conversion premium) => Five-year Treasury yield = 4.46% => 25% (value necessary to get $1,000 per bond) = 5.0 Conversion option value = Black-Scholes call value = $241.7 Bond value (0.125% coupon) = Conversion option value = Convertible bond value = $758 $242 $1,00 0 (5 year, 0.125% coupon) (Black-Scholes) 27 28 Case 40 MoGen, Inc. Exhibit TN6 (continued) 2013 Notes Maturity Coupon Current stock price Conversion premium Conversion price Conversion shares 7.0 0.375% $71.93 10.5% $79.48 12.581 Black-Scholes Inputs (no dividend, European option) S: Underlying asset price = Stock price Conversion shares = Conversion value = $71.93 12.581 = $905.00 X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration => Face value of bond = $1,000 (10.5% conversion premium) => 5-year Treasury yield = 4.46% => 25% (value necessary to get $1,000 per bond) = 7.0 Conversion option value = Black-Scholes call value = $309 Bond value (0.125% coupon) = Conversion option value = Convertible bond value = $692 $309 $1,00 1 (7 year, 0.375% coupon) (Black-Scholes) Case 40 MoGen, Inc. Exhibit TN7 MOGEN, INC. Valuing the Hedging Transaction Call Options for 2011 Notes Maturity Current stock price Exercise price Conversion shares per bond Total options needed 5.0 $71.93 $79.84 12.525 31.313 million (2.5 million 12.525) Black-Scholes Inputs (no dividend, European option) S: Underlying asset price X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = $71.93 = $79.84 (11% conversion premium) = 4.46% (5-year Treasury yield) = 25% (implied volatility, see Exhibit TN6) = 5.0 Call option value = $19.3 31.313 = $604 million Call option value using Exhibit TN6 cost of $242/bond = 242 2.5 = $604 million Call Options for 2013 Notes Maturity 7.0 Current stock price $71.93 Exercise price $79.48 Conversion shares per bond 12.581 Total options needed 31.453 (2.5 million 12.581) Black-Scholes Inputs (no dividend, European option) S: Underlying asset price X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = $71.93 = $79.48 (10.5% conversion premium) = 4.46% (5-year Treasury yield) = 25% (implied volatility, see Exhibit TN6) = 7.0 Call option value = $24.6 31.453 = $773 million Call option value using Exhibit TN6 cost of $309/bond = 309 2.5 = $773 million 29 30 Case 40 MoGen, Inc. Exhibit TN8 MOGEN, INC. Valuing the Warrant Issuance Warrants for 2011 Notes Maturity Current stock price Exercise price Total options needed 5.0 $71.93 $107.9 (50% premium) 31.313 million (Exhibit TN7) Black-Scholes Inputs (no dividend, European option) S: Underlying asset price X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = $71.93 = $107.9 (50% premium) = 4.46% (5-year Treasury yield) = 25% (implied volatility, see Exhibit TN6) = 5.0 Warrant value = $11.1 31.313 = $348 million Warrants for 2013 Notes Maturity Current stock price Exercise price Total options needed 7.0 $71.93 $107.9 (50% premium) 31.453 million (Exhibit TN7) Black-Scholes Inputs (no dividend, European option) S: Underlying asset price X: Exercise price Rf: Risk-free rate : Annualized volatility : Years to expiration = $71.93 = $107.9 (50% premium) = 4.46% (5-year Treasury yield) = 25% (implied volatility, see Exhibit TN6) = 7.0 Warrant value = $16.2 31.453 = $510 million Case 40 MoGen, Inc. Exhibit TN9 MOGEN, INC. Cash Flows for MoGen Convertible Bond Deal Issuance of 2011 and 2013 Notes $2.5 billion 2011 notes $2.5 billion 2013 notes $5.0 billion INFLOW Purchase Call Options to Nullify Conversion Option $604 million for 2011 notes $773 million for 2013 notes $1.38 billion OUTFLOW Issue Warrants with 50% Strike Premiums $348 million for 2011 notes $510 million for 2013 notes $0.86 billion INFLOW Net proceeds = 5.0 1.38 + 0.86 = $4.5 billion 31

Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.

Below is a small sample set of documents:

Abu Dhabi University - ECON - 101
NGN HNG CNG THUONG CNG HO X HI CH NGHA VIT NAMVIT NAMc lp - T do - Hnh phcH Ni, ngy 30 thng 03 nm 2010 CNG N TPNGHIP V TN DNG, QUN L N C VN V RI RO TC NGHIPDnh cho:- Nhn vin Phng Qun l n c vn ti TSC.- Lnh o v nhn vin Phng/t Qun l ri ro ti chi nhnh
Abu Dhabi University - ECON - 101
NGN HNG TMCP CNG THNGCNG HA X HI CH NGHA VIT NAMc lp - T do - Hnh phcVIT NAMH Ni, ngy 06 thng 4 nm 2010 CNG N TPNGHIP V TIN T KHO QU NM 2010(Theo Cng vn s 156/CV-HQT-NHCT1 ngy 6/4/2010 ca Ch tch HQT)Phn th nht: L thuyt (s dng chung cho c vng 1 v v
Abu Dhabi University - ECON - 101
cng n thi nghip v CNTT Nm 2010Dnh cho vn hnh vin, cao ng tin hc1. Nhng khi nim c bn v my tnha. Hiu v phn bit cc loi my tnh (my ch, my trm, laptop, ) v i tng s dngtng loib. Phn bit gia h iu hnh v phn mm ng dng, hiu khi nim phin bn phn mmc. Hiu v cc
Abu Dhabi University - ECON - 101
cng n thi nghip v CNTT dnh cho k s ti Chi nhnh - Nm 2010Phn bt buc i vi tt c cc k s1. Cch biu din d liu v lgic C s m Cch biu din d liu s (BCD, packed, unpacked, du phy ng, du phy tnh) v kt (ASCII, EBCDIC, Unicode) Cc php ton v chnh xc (dch bit, AND
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp - T do - Hnh phcH Ni, ngy 6 thng 04 nm 2010 CNG N TPNGHIP V HUY NG VN, TN DNG V SN PHM DCH V KHCNDnh cho: Nhn vin phng Khch hng c nhn Ti Tr s chnh Lnh o v nhn vin Phng Khch hng c nhn hoc ph
Abu Dhabi University - ECON - 101
NGN HNG TMCPCTVIT NAMCNG HO X HI CH NGHA VIT NAMc lp T do Hnh phcH Ni, ngy 08 thng 04 nm 2010 CNGN TP NGHIP V K TON NGN HNGA/ NI DUNG N TP:I/ I VI CN B L GIAO DCH VIN, K TON VIN KIM SOT VIN V HUKIM: (ang hng mc lng t bc 07 tr xung)1. K ton nghip
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp - T do - Hnh phcH Ni, ngy 6 thng 04 nm 2010 CNG N TPNGHIP V K TON TH CHO CHI NHNHI. Ti liu cn nghin cu:1. Tng quan v cc sn phm v dch v th ca Vietinbank, bao gm c cctnh nng v tin ch lin quan
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp - T do - Hnh phcH Ni, ngy 6 thng 04 nm 2010 CNG N TPNGHIP V MARKETING TH - DNH CHO CHI NHNHI.Phn l thuyt Marketing: Bn cht v ni dung ca k hoach marketing Phn tch SWOT (im mnh, im yu, c hi
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONG CNG HO X HI CH NGHA VIT NAMVIT NAMc lp - T do - Hnh phcH Ni, ngy 30 thng 03 nm 2010 CNG N TPNGHIP V TN DNG, HUY NG VN V SN PHM DCH V KHDNDnh cho: Nhn vin cc Phng KHDN Ti Tr s chnh Nhn vin cc Phng CTD &T v P. Qun l ri ro TD, T ti
Abu Dhabi University - ECON - 101
NGN HNG TMCP CNG THNG VIT NAMS GIAO DCH CNG THI NGHIP V TI TR THNG MI NM 2010Cc phng thc thanh ton quc t1. Nm vng cc phng thc thanh ton ph bin hin nay: Khi nim, ni dung vquy trnh ca tng phng thc, vai tr v trch nhim ca cc bn tham gia trongqu trnh tha
Abu Dhabi University - ECON - 101
CNG N THI NGHIP V CHUYN TIN NM 20101. Ni dung n tp:-nh ngha, ni dung v quy trnh ca phng thc chuyn tin, vai tr vtrch nhim ca cc bn tham gia trong qu trnh thanh ton.-Ch qun l ngoi hi.-Cc hnh thc chuyn tin t nc ngoi v Vit Nam-Cc mu in SWIFT lin qu
Abu Dhabi University - ECON - 101
CNG N THI NGHIP V K TON NM 2010(Dnh cho cn b K ton SGD)Ngoi ni dung n tp nghip v k ton nm 2010 ca NHTMCP cng thngVN,SGDyu cu cn b v trng ph phng k ton nm vng quy trnh th tc, lunchuyn chng t v phng php hch ton k ton ca tng nghip v. C th:I/ K ton nghi
Abu Dhabi University - ECON - 101
NGN HNG TMCP CNG THNGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp T do Hnh phcPHNG DV NH IN TH Ni, ngy 05 thng 04 nm 2010 CNG N TPCC VN BN CH NGHIP V NHTPHN ICC VN CHNH CA NGHIP V NGN HNG IN TSTTS vn bnNgy banhnhNi dungBan hnh Quy nh tm thi dch v
Abu Dhabi University - ECON - 101
cng n tp nghip v k ton cho TTTI.Ti liu cn nghin cu:1. Quy trnh nghip v pht hnh, thanh ton v s dng th tn dng quc tVisa/Mastercard trong h thng NHCTVN M s QT.32.102. Quy trnh nghip v pht hnh v s dng th E-partner trong h thngNHCT. M s QT.32.013. Quy t
Abu Dhabi University - ECON - 101
CNG N TP NGHIP V QUN L RI RO(qun l ri ro, gii quyt tranh chp v chun chi)1. Kin thc chung-Cc sn phm v dch v th ca Vietinbank-H thng Switch chuyn mch v cc module ng dng qun l ri ro-H thng quy trnh pht hnh v thanh ton th hin ti? Cc quy trnh phi hp l
Abu Dhabi University - ECON - 101
CNG N THI NGHIP V MARKETING TH - P DNG I VI TTTI. Kin thc chung, kin thc nghip vBn cht v ni dung ca k hoach marketingPhn tch SWOT (im mnh, im yu, c hi v thch thc) trong hot ng kinh doanhca doanh nghipChnh sch 4P, 6P, 4CChu k sng ca sn phmGi v cc y
Abu Dhabi University - ECON - 101
CUNG N TP V THI NGHIP V NM 2010p dng i vi Cn b Phng XD&QL ISO, Tr s chnhNgn hng TMCP Cng thng Vit NamKnh gi: Trng o to v pht trin NNLI.Ni dung n tp1. Tiu chun ISO 9001:2008 (H thng QLCL - Cc yu cu)2. Tiu chun ISO 19011:2003 (Hng dn nh gi h thng QL
Abu Dhabi University - ECON - 101
PHNG KINH DOANH NGOI T CNG N THINGHIP V KINH DOANH NGOI T1/ Mt s ni dung c bn ca Php lnh ngoi hi s 28/2005/PL-UBTVQH11ngy 13/12/2005 v Ngh nh ca Chnh ph s 160/2006/N-CP ngy 28/12/2006Quy nh chi tit thi hnh Php lnh ngoi hi-Mc tiu chnh sch qun l ngoi
Abu Dhabi University - ECON - 101
cng n tp(chi tit cho cng n tp)K thutI. Tin hc c bn:- Kin thc c bn v mng my tnh (M hnh OSI, a ch IP, cc giao thc cbn FTP, HTTP, Telnet, SMTP, POP3, . . .), MAC address- Kin thc c bn v h iu hnh Windows.- Chng trnh, thut tonII. Kin thc chung- Cc sn
Abu Dhabi University - ECON - 101
CNG HO X HI CH NGHA VIT NAMNGN HNG TMCP CNG THNGVIT NAMc lp T do Hnh phcPHNG DV NH IN TH Ni, ngy 05 thng 04 nm 2010 CNG N TPCC VN BN CH NGHIP V NHTPHN ICC VN CHNH CA NGHIP V NGN HNG IN TSTTS vn bnNgy banhnhNi dungBan hnh Quy nh tm thi dch v
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp - T do - Hnh phcH Ni, ngy 6 thng 04 nm 2010 CNG N TPNGHIP V K TON CHO CHI NHNHI. Ti liu cn nghin cu:1. Tng quan v cc sn phm v dch v th ca Vietinbank, bao gm c cctnh nng v tin ch lin quan2.
Abu Dhabi University - ECON - 101
NGN HNG CNG THUONGVIT NAMCNG HO X HI CH NGHA VIT NAMc lp - T do - Hnh phcH Ni, ngy 6 thng 04 nm 2010 CNG N TPNGHIP V MARKETING TH - DNH CHO CHI NHNHI.Phn l thuyt Marketing: Bn cht v ni dung ca k hoach marketing Phn tch SWOT (im mnh, im yu, c hi
Abu Dhabi University - ECON - 101
PHNG QUN L RI RO TH TRNG & TC NGHIP CNG N TP NGHIP V QUN L RI ROPhn I: Kin thc v qun l ri ro ni chung v qun l ri ro tc nghip (40% im)1. Khi nim ri ro,cc loi ri ro trong ngn hng thng mi v mi quan h gia cc loi ri ro2. Vai tr ngha ca nghip v qun l ri ro
Abu Dhabi University - ECON - 101
3.FRAMEWORK - DEFINING AN ENABLING ENVIRONMENT FOR MFIS .153.1POVERTY AS EXCLUSION, HUMAN DEVELOPMENT AS EXPANDING THEAVAILABILITY OF CHOICES153.1.1Poverty : a Limitation of Choices - Concepts andIndicators.153.1.2The Needed Enabling Environment
Abu Dhabi University - ECON - 101
http:/vuighe.net/xem-phim-online/dao-hai-tac-tap-1-one-piece-ep-1_17444.html
Abu Dhabi University - ECON - 101
Americans have in the past century assumed that their schools will be comprehensive, especially at thesecondary, or high school, level. Stated another way, there has always been broad agreement inAmerican society that public education will not follow a
Abu Dhabi University - ECON - 101
CchhctingNhtchongimibtu(SutmvtnghpbiduhcNhtOSC)Khimibt uhctingNht, iutrctinbncnphihc l bngch citingNht(phinh mtch,cch cv cchvit).Khinybnc th thamkho cchhcsauy.(Lu,cchcvvitbngchcicposttopickhctrongforumny.Nubn c btk cuhinov cchhclcmibt u,bnc th postn
Abu Dhabi University - ECON - 101
Harvard System of Referencing: Basic GuideThis Guide is designed to help you start using the Harvard System of Referencing. It introduces the concepts of referencing andprovides some basic examples. For more detailed information, please see the Library
Abu Dhabi University - EGY - 192
HANOI UNIVERSITYFACULTY OF MANAGEMENT AND TOURISMMIDTERM TESTBUSINESS MODELINGSTUDENT FULL NAME _ID_MAJOR:_TUTOR:_ TUT:_ DATE: _ TIME: 30 MINSInstruction:- You are required to complete the midterm test (including section A and B) by using Excel.-
Abu Dhabi University - EGY - 192
Chapter 03 - The Organization and Structure of Banking and the Financial-Services IndustryCHAPTER 3THE ORGANIZATION AND STRUCTURE OF BANKING AND THE FINANCIALSERVICES INDUSTRYGoal of This Chapter: The goal of this chapter is to explore the different ty
Abu Dhabi University - EGY - 192
Chapter 05 - The Financial Statements of Banks and Their Principal CompetitorsCHAPTER 5THE FINANCIAL STATEMENTS OF BANKS AND THEIR PRINCIPALCOMPETITORSGoal of This Chapter: The purpose of this chapter is to acquaint the reader with the content,struct
Abu Dhabi University - EGY - 192
Chapter 06 - Measuring and Evaluating the Performance of Banks and Their Principal CompetitorsCHAPTER 6MEASURING AND EVALUATING THE PERFORMANCE OF BANKS AND THEIRPRINCIPAL COMPETITORSGoal of This Chapter: The purpose of this chapter is to discover wha
Abu Dhabi University - EGY - 192
Chapter 07 - Risk Management for Changing Interest Rates: Asset-Liability Management and Duration TechniquesCHAPTER 7RISK MANAGEMENT FOR CHANGING INTEREST RATES: ASSET-LIABILITYMANAGEMENT AND DURATION TECHNIQUESGoals of This Chapter: The purpose of th
Abu Dhabi University - EGY - 192
Chapter 08 - Risk Management: Financial Futures, Options, Swaps, and Other Hedging ToolsCHAPTER 8RISK MANAGEMENT: FINANCIAL FUTURES, OPTIONS, SWAPS, AND OTHERHEDGING TOOLSGoal of This Chapter: The purpose of this chapter is to examine how financial fu
LSU - FINANCE - 3716
FIN3716Section 12Quiz 3Chapter61.What is the interest rate charged per period multiplied by the number ofperiods per year called?A. effective annual rateB. annual percentage rateC. periodic interest rateD. compound interest rateE. daily interest
CSU Sacramento - ACCOUNTING - 121
Ashwin PrasadAccy 1215/14/2011Mon-Wed 7:00am-8:45amChapter 8- Extra CreditQuestions8-1) Managers plan for variable overhead costs by using flexible budgets and variance analysis. More generally,they seek out and eliminate any activities that dont s
CSU Sacramento - ACCOUNTING - 121
ACCT 1214/13/11*CH 12 do up to 30 pointsCH 15Direct methodStep down methodSingle rateDual rateIncrementalStand-alone
CSU Sacramento - ACCOUNTING - 121
Acct 1214/6/11-110 selling price-Price $110-PC maker -11 (10%)profit-PC install & test -25= 74 net selling priceCurrent Cost-total cost 72-unit cost 4- admin cost 14-installation cost 25=115 total current costTarget Cost (right next to curre
CSU Sacramento - ACCOUNTING - 121
ComponentsMotorBlade AssemblyDrawerOuter casingSubtotalCurrent Actual Cost$6.40$3.20$2.40$4.00$16.00Customer RequirementsCustomer RankingsSpeed of sharpeningEase of cleaning scrapingsAppearanceTotalComponentsMotorBlade AssemblyDrawer
CSU Sacramento - ACCOUNTING - 121
California State University, SacramentoAIS 141: ACCOUNTING INFORMATION SYSTEMS DEVELOPMENTInstructor: Dr. Yan Xiong (Dr. X)Office: TAH-2082Office Phone: 278-7143E-mail: xiongy@csus.eduWebCT address: http:/online.csus.edu (See below for details on th
CSU Sacramento - ACCOUNTING - 121
Many of the roots of human behavior can be traced to our ape heritage e.g. bonobos;which includes survival through cooperation and mutual assistance. While the same mechanismsand purposes may underlie bonobos and human social behavior, distinct solution
CSU Sacramento - ACCOUNTING - 121
Many of the roots of human behavior can be traced to our ape heritage e.g. bonobos;which includes survival through cooperation and mutual assistance. While the same mechanismsand purposes may underlie bonobos and human social behavior, distinct solution
CSU Sacramento - ACCOUNTING - 121
a. Evaluate the cost planning efforts of Modern in light of what you have studied abouttarget costing. Is their approach consistent with target costing?Modern is using some elements of target costing. First of they are using price led costing inwhich t
CSU Sacramento - ACCOUNTING - 121
Spring 11J. (Bill) DalyCALIFORNIA STATE UNIVERSITY, SACRAMENTOCOLLEGE OF BUSINESS ADMINISTRATIONOPM 101COURSE SYLLABUSOFFICE:OFFICE HOURS:Room 2081Mon and Wed 7:15-7:45 PMSaturday 10:50 -11:20 AM or by appointmentOFFICE PHONE:N/AE-MAIL:daly@
CSU Sacramento - ACCOUNTING - 121
Capital Oral & Maxillofacial Surgery9727 Elk Grove Florin Rd, #230Elk Grove, CA 95624
CSU Sacramento - ACCOUNTING - 121
Final Exam Review SheetThe Final Exam will be in class on May 16th at Riverside Hall 1015 from 12:45PM2PM. You will need a Scantran 882 form (the long one) and a calculator for the exam.The final exam is made up of a combination of 50 multiple choice qu
CSU Sacramento - ACCOUNTING - 121
Name: _ Date: _1.The following information relates to acompany's aggregate production planningactivities:QuarterDemand Forecast175,0002100,000375,0004125,000Beginning Workforce = 35 workersProduction per Employee = 1,250 units perquarter
CSU Sacramento - ACCOUNTING - 121
Name: _ Date: _1.The following information relates to acompany's aggregate production planningactivities:QuarterDemand Forecast175,0002100,000375,0004125,000Beginning Workforce = 35 workersProduction per Employee = 1,250 units perquarter
CSU Sacramento - ACCOUNTING - 121
Quiz #1st attempt 2nd attemptscenario 1818 your actual results814.4 after discounting your 2nd14.4 used in the final gradingscenario 215151518 your actual results14.4 after discounting your 2ndused in the final grading
CSU Sacramento - ACCOUNTING - 121
Name: _ Date: _1. Given the demand and forecast values shownin the table below:PeriodDemandForecastJune495484July515506August519528September496506October557550The three-period moving average forecast forNovember would be2. Annual de
CSU Sacramento - ACCOUNTING - 121
Name: _ Date: _1. Given the demand and forecast values shown in thPeriodJuneJulyAugustSeptembOctoberThe three-period moving average forecast for Nov550+506+528 = 52832. Annual demand for a product is 40,000 units. Theevery year. The annual hol
CSU Sacramento - ACCOUNTING - 121
Name: _ Date: _1. Given the demand and forecast values shown in the table below:PeriodDemandForecastJune495484July515506August519528September496506October557550Nov524The three-period moving average forecast for November would be(557
CSU Sacramento - ACCOUNTING - 121
OPM 4/2Quality Management-Trade quality for price-Crosby-Do it right the first time (quality)-PDSA circle-Plan (cannot improve if it doesnt meet expectations)-Type I Error-Type II Error-Process flow diagram-Cause and effect diagram-Pareto (80%,
CSU Sacramento - ACCOUNTING - 121
OPM 3/12/11Review75 questionsPhilosophical questionsDont think too much!20 math problemsChapter 1Operations Management is involved in selling products-False-Productivity O/I 100% output/100%input partial productivity 100% output/percentageinput-
CSU Sacramento - ACCOUNTING - 121
OPM 1014/9/11SPC-Population- represents everyone-Sample- must represent the population-Attribute-UCL-LCLAnything out of range of the UCL and LCL is bad.p-Barp-chartc-chartxbar-chartr-bar chartCPCPKeg. [ , ] (both have to be good or else it
CSU Sacramento - ACCOUNTING - 121
OPM 1014/30/11Exam: 9AMDSM- demand supply matching-revenue, people factors are missingS&OP-supply and operation planning-added revenue-shifting of demand (not creating new demand)BTS-build to stock-warehouse inventory-shipping on orders14.4ATP
CSU Sacramento - ACCOUNTING - 121
OPM 1015/7/11Channel InventoryManufacturing InventoryWork in progress inventoryLower level partsRisk pullingPush n PullJust in time InventoryMUDA7 things Japanese find as wastes-Overproduction-Transportation-Inventory-Movement-DefectsElimi
CSU Sacramento - ACCOUNTING - 121
OPM 101 NotesFitness for use: is how well the product or service does what is it supposed to doQuality of design: the degree to which quality characteristics are designed into the product (ford vs Mercedes)Dimensions of quality for manu: performance, f
CSU Sacramento - ACCOUNTING - 121
INTERNSHIP OPPORTUNITYAccounting InternJob Title:Schedule:Pay Rate:Final Filing Date:Accounting InternPart-time; 20 + hours/week$15.00/hourMarch 4, 2011Pacific Coast Building Products, Inc. is a vertically integrated building supply manufacturer
CSU Sacramento - ACCOUNTING - 121
Strategy Debriefing ReportTeam ErieIndustry C49523Ashwin PrasadDaisy RoseOVERVIEW OF INDUSTRYIn our industry C49523, it was clear almost from the very beginning that there were two verywell performing teams. Digby and Andrews commanded much of the
CSU Sacramento - ACCOUNTING - 121
Accounting 111: Intermediate Accounting ISpring 2011 (Section 04)Instructor:Office Location and Phone:Email:Online Office Hour:Feng (Johnny) DengTahoe 2076 and 916-278-7136dengf@csus.eduOnline (in person Q&A with advance appointment)Required Cou