Star River Electronics Ltd

Abstract

In July 2001, a new CEO joins this small manufacturer of CD-ROMs and DVDs to discover that the firm is in the midst of a financial crisis, induced by rapid growth. The CEO asks an analyst for help with five tasks: (1) review historical performance of the firm; (2) forecast financing requirements for the next two years; (3) exercise the forecasting model to identify â¬Skey driverâ¬? assumptions; (4) estimate Star Riverâ¬"s weighted average cost of capital; and (5) analyze a proposed investment in a packaging machine. The analyst must offer insights and recommendations based on the work. The aim of the case is to exercise studentsâ¬" abilities in financial forecasting and analysis and in the analysis of capital projects. Generally, the case offers a good omnibus review of foundational tools and concepts.