Female Health Company

Published 26 May 2015
Reference 5717
Industry Medical Devices
Region Other Regions
Summary

Female Health Company produces the female condom which is distributed by non-profit organisations in Africa to prevent HIV/AIDS. In February 2009 the company has to decide whether to buy back stock. This provides an opportunity to check whether the firm is fairly valued and whether it should reconsider its capital structure and payout policy.

Teaching objectives

The main purpose is to teach company valuation in a framework where a firm's target capital structure is changing over time because of changes in the corporate tax rate. At the same time it provides an opportunity to discuss capital structure as well as payout policy (dividends vs. various types of share buybacks). It also provides an illustration of how "doing good" can be very profitable. The case may be useful to representatives of NGOs who want to better understand the point of view of the manufacturers of the product.

Keywords
  • Valuation
  • Financing
  • Payout policy
  • Socially Responsible Business
  • Q31415
  • Corporate Governance
  • Auditing, Risk Control and Performance