The crux of this class is learning about tools and metrics to examine the financial viability of new projects that will create value for the firm and to evaluate the health of an organization through capital budgeting, and capital conservation etc. Accordingly, this project is aimed at allowing you to take a firm that clearly did certain things wrong and explain (using concepts from the course) how a financial manager SHOULD have resolved the issues.
Pick a large cap U.S. company that declared bankruptcy between 1980 and 2009. Use this company, and its apparently failures, to answer the following:
1) Describe the nature of the company, what it did, how it was formed, and what service / production it was primarily engaged prior to its failure.
2) Provide a brief overview of the timeline surrounding its bankruptcy (no more than half a page).
3) Provide three specific reasons, supported by research, to demonstrate that your firm was crippled by concepts related to poor capital budgeting. (Note: ALL bankruptcies at some level can be traced back to a lack of proper capital budgeting).
4) Did the firm’s capital structure help or hinder its initial success and did its capital structure help or hinder its ability to stave off its ultimate bankruptcy? Provide specific examples from your research!
5) Did hybrid financing, alternative financing, or other “non‐traditional” means of financing help or hinder your firm? (in other words, if the firm used only traditional financing means, would bankruptcy have been more or less likely?)
6) In 3 pages or less, explain 4 critical actions that a financial manager should have taken in order to avoid bankruptcy. Note – all of your suggested actions must relate directly to the topics covered during this 8 week course. Be certain to use course vocabulary and course concepts in order to demonstrate your mastery of the material.
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