Star River Electronics – Case XXV
1. Assess the current financial health and recent financial performance of the
company. What strengths and/or weaknesses would you highlight to Koh?
2. Forecast the firm’s financial statements for 2002 and 2003. What will be the
external financing requirements of the firm in those years?
Can the firm repay its loan within a reasonable period?
3. What are the key driver assumptions of the firm’s future financial
performance?
What are the managerial implications of those key drivers?
That is, what aspects of the firm’s activities should Koh focus on especially?
4. What is Star River’s weighted-average cost of capital (WACC)?
What methods did you use to estimate WACC?
What are the key assumptions that influence WACC?
5. What are the free cash flows of the packaging machine investment? Should
Koh approve the investment?
? review the historical performance of the firm
? forecast financing requirements for the next two years
? exercise the forecasting model to identify key driver assumptions
? estimate Star River’s weighted-average cost of capital
? analyze a proposed investment in a packaging machine