FIN534 Week 1 Scenario Script: The Primary Objective of the Corporation: Value Maximization Slide # Scene/Interaction Narration Slide 1 Scene 1 · Opening scene is in a commercial format using several pictures in a gym in a slide show · Fade at end as you go into the next slide Narrator(Man): Trevose Fitness Center is more than just working out. It is an Experience! From the time you enter our facility you are taken to a whole new level of working out. We have state of the art equipment, which offers many classes to fit your needs, and provide the best in training and experience that one can have. Look at everyone having fun…….. (Break – show some people working out) Workout Woman: “I never wanted to work out. Ever since I joined Trevose Fitness Center, I don’t want to leave. They make working out fun!” Narrator(Man): Here at Trevose Fitness Center we like to say that we took the “work” out of working out and made it “Fun”! Remember, it is not fun unless you are having the TFC Experience………. We hope to see you soon…..(fade) Slide 2 Scene 2 · Joseph Jacobs is in office · Have him move around the office · Show a map of the US? · Go to next slide FIN534_1_2_Joe-1: Hi everyone. You just saw parts of our most recent commercial that is running all over the East Coast. I am Joseph Jacobs, the Chief Executive Officer at Trevose Fitness Center or better known as TFC. My family started the business about twenty years ago having a different twist to working out. We like to say that you will have Fun, Fun, Fun until your Daddy takes TFC away………. Remember that Beach Boys song?? (Laughter) FIN534_1_2_Joe-2: Over the years we have seen our business model really take off. In the past twenty years we have also grown to one hundred Fitness Centers all on the East Coast. I have been involved with every one of the openings and am proud to say that each one is still open today. FIN534_1_2_Joe-3: During that time we have been approached by many companies about selling, but there is too much sentimental value; therefore, we do not want sell the company. However we have an opportunity to expand our operations out west and could really use your help. As you may have figured out, I am not a financial guru. A fitness guru, yes, and I like getting out there and selling the TFC brand. I leave all of the financial decisions to our expert, Don Rising. Slide 3 Scene 3 · Don Rising is in office · Show Strayer MBA banner · Show a map of the US? · Go to next slide FIN534_1_3_Don-1: Thanks Joe. Hi everyone, I am Don Rising, the Chief Financial Office,r who has been put in charge of overseeing this big expansion project by Joe. I joined TFC ten years ago as the manager of new operations after working in the financial industry for years. I was able to work my way up the ladder here at TFC largely due to the education I received at Strayer University, where I completed my MBA. GO STRAYER! FIN534_1_3_Don-2: I am not full of all the phy ...

1. FIN534 Week 1 Scenario Script: The Primary Objective of the
Corporation: Value Maximization
Slide #
Scene/Interaction
Narration
Slide 1
Scene 1
· Opening scene is in a commercial format using several
pictures in a gym in a slide show
· Fade at end as you go into the next slide
Narrator(Man): Trevose Fitness Center is more than just
working out. It is an Experience! From the time you enter our
facility you are taken to a whole new level of working out. We
have state of the art equipment, which offers many classes to fit
your needs, and provide the best in training and experience that
one can have. Look at everyone having fun……..
(Break – show some people working out)
Workout Woman: “I never wanted to work out. Ever since I
joined Trevose Fitness Center, I don’t want to leave. They
make working out fun!”
Narrator(Man): Here at Trevose Fitness Center we like to say
that we took the “work” out of working out and made it “Fun”!
Remember, it is not fun unless you are having the TFC
Experience………. We hope to see you soon…..(fade)
Slide 2
Scene 2
· Joseph Jacobs is in office
· Have him move around the office
· Show a map of the US?
· Go to next slide

2. FIN534_1_2_Joe-1: Hi everyone. You just saw parts of our
most recent commercial that is running all over the East Coast.
I am Joseph Jacobs, the Chief Executive Officer at Trevose
Fitness Center or better known as TFC. My family started the
business about twenty years ago having a different twist to
working out. We like to say that you will have Fun, Fun, Fun
until your Daddy takes TFC away………. Remember that Beach
Boys song?? (Laughter)
FIN534_1_2_Joe-2: Over the years we have seen our business
model really take off. In the past twenty years we have also
grown to one hundred Fitness Centers all on the East Coast. I
have been involved with every one of the openings and am
proud to say that each one is still open today.
FIN534_1_2_Joe-3: During that time we have been approached
by many companies about selling, but there is too much
sentimental value; therefore, we do not want sell the company.
However we have an opportunity to expand our operations out
west and could really use your help. As you may have figured
out, I am not a financial guru. A fitness guru, yes, and I like
getting out there and selling the TFC brand. I leave all of the
financial decisions to our expert, Don Rising.
Slide 3
Scene 3
· Don Rising is in office
· Show Strayer MBA banner
· Show a map of the US?
· Go to next slide
FIN534_1_3_Don-1: Thanks Joe. Hi everyone, I am Don
Rising, the Chief Financial Office,r who has been put in charge
of overseeing this big expansion project by Joe. I joined TFC
ten years ago as the manager of new operations after working in
the financial industry for years. I was able to work my way up

3. the ladder here at TFC largely due to the education I received at
Strayer University, where I completed my MBA. GO
STRAYER!
FIN534_1_3_Don-2: I am not full of all the physical energy that
Joe has and am more of a numbers person. So, I have the mental
energy! This expansion is huge for us and we have built a solid
team to oversee it. Let me introduce you to Linda Smith, the
manager of new operations.
Slide 4
Scene 4
· Linda Smith
· Show Strayer MBA banner
· Joe comes in
· Go to next slide
FIN534_1_4_Linda-1: Thanks Don. Hi everyone, I am Linda
Smith and also received my MBA from Strayer University.
Awwwwww, I remember my school days! As Don said, I am the
manager of new operations. This expansion project can help us
easily double our company size, so we need to make sure that
we analyze it thoroughly. During my six years at TFC, I have
seen us grow, but not to this extent. Joe has selected Don, me
and one other person to analyze this project.
FIN534_1_4_Linda-2: Congratulations, we have selected you
as an intern to help with the project! Your strong educational
background with Strayer made this decision easy. So, let's put
our education and know-how to practice.
FIN534_1_4_Linda-3: As you can see, Joe is full of energy
about this project so we want to do our best on this analysis.
Over the next few weeks, we will be looking at many different
areas of the financial management process to make a
recommendation on the project. We will be faced with some
tough decisions to make, but working together, I am sure we

4. will reach our goal. Welcome to the Team!
Slide 5
Scene 5
Review all characters
· Use a slide where you show the corporate structure for this
project
· Put their pictures and titles underneath them
· Go to next slide
Animation – list all characters here
· Joe – CEO
· Don – CFO
· Linda – New Operations
· Intern – Expansion Project
FIN534_1_5_Linda-1: Looks like you have met everyone
involved in this effort. To recap, Joe is our CEO. Don is our
CFO who reports to Joe. And I am the manager of new
operations who is overseeing this project with you.
Slide 6
Scene 6
Check Point:
Why is TFC looking at expanding?
(select best choice)
A) To be the biggest fitness center in the United States
Answer: Nice try but not correct. Businesses don’t expand to
because they want to be the biggest. There is a better
underlying meaning
B) To be able to attract new customers

5. Answer: Good choice but not correct. While expanding will
attract new customers, business look at expanding for internal
and external reasons.
C) To build shareholder wealth
Answer: Correct. When businesses look at projects, they are
concerned with the primary well-being of the company and its
investors. Projects that create positive cash for a company
increases its bottom line and overall shareholder wealth.
Slide 7
Scene 7
Linda gives an overview of company and what to look for in
value maximization
·
· Standing in her office
· Discusses Value Maximization
FIN534_1_7_Linda-1: Now that you got to meet everyone,
let’s roll up our sleeves and get started on this project.
FIN534_1_7_Linda-2: We are looking into this project to
maximize shareholder wealth for TFC. What do we mean by
that? It can be confusing.
Slide 8
Scene 8
· Linda Speaks
· Standing in her office
· Show two points here – Market Price and Fundamental Price
· Simple Corporate Structure (top-down)
· Show Market Price versus Intrinsic/Fundamental Price
· Discusses Value Maximization
FIN534_1_8_Linda-1: As you know, the shareholders are the
ones who own the corporation…remember what you learned in
in your Strayer accounting classes? Shareholders purchase stock

6. in companies, like Trevose Fitness Center, because they want to
see their investment grow or meaning that they want a return on
their equity. Shareholders also vote for directors, who in turn
hire managers to run the company. Here at TFC, we have a
board of directors who hired Joe and Don along with other
senior managers. Don hired me, which led me to suggest the
need for an intern, like you. Do you see how this cycle
evolves?
FIN534_1_8_Linda-2: The primary interest of the managers is
shareholder wealth maximization. But that can be taken
differently. You see, shareholders see the market price of the
stock which is what people can pay for a share of TFC in the
open market. They base their return on how high the share
price goes. However, there is another price, called the intrinsic
price. The intrinsic price is also called the Fundamental Price.
Slide 9
Scene 9
· Linda Speaks
· Have something on the screen about the intrinsic/fundamental
value on screen
· Discusses Value Maximization
FIN534_1_9_Linda-1: So, which price is more important? Of
course it is the Intrinsic Price. That is the price that is derived
assuming all available information is known about a company;
this is rare!. For example, if we told our competitors all of our
plans, then we won’t be able to have that competitive
advantage. Also, timing of company actions may show better
results than we actually have. These are just a few examples of
where “what you see is not really what you get.”
However, this Intrinsic Price is the price that managers need to
consider when they are trying to maximize shareholder wealth.
You see, in order to maximize shareholder wealth you need to
know everything about a company. Then, you can put a value
on a company. So, managers should really be concerned with

7. the value of a company and not its Market Price
FIN534_1_9_Linda-2: As you dig deeper into your analysis
of TFC, keep that in mind.
Slide 10
Scene 10
· Linda Speaks
· Is intrinsic value maximization good or bad for society?
· Put reasons on a chart
FIN534_1_10_Linda-1: Then, the question that comes up “Is
intrinsic value maximization good for society?”
FIN534_1_10_Linda-2: Of course, it is good. Here are some
reasons.
One, more people are invested in the stock market;
Two, company Efficiency;
And three, employee benefits.
Let’s look at each one as it relates to TFC.
Slide 11
Scene 11
Linda: List number 1 on the slide.
·
1) More people are invested in the stock market
2) Company Efficiency
3) Employee Benefits
FIN534_1_11_Linda-1: Today more and more people have a
direct or indirect interest in the markets. More companies are
offering defined contribution plans that invest mainly in mutual
funds by employees. Also, with investing being more available
now, people are investing in the markets, including stocks,
bonds, money markets, mutual funds, and even exchange traded
funds or ETFs. Also, many parents are starting early with tax

8. benefit college funds. You may have heard of them. They are
called section five-twenty-nine plans. The list can go on, but
what to see here is more people are investing than years ago.
That is a good thing for society
FIN534_1_11_Linda-2: At TFC, our employees, called Crew
Builders, participate in a four-o-one k retirement plan. They
are also educated on the many investment options for them to
build a better financial future.
Slide 12
Scene 12
Linda: List number 2 on the slide.
· Linda Speaks
1) More people are invested in the stock market
2) Company Efficiency
3) Employee Benefits
FIN534_1_12_Linda-1: With competition being so great
companies are always looking for better ways of doing things at
a lower cost. Technological enhancements or product upgrades
can help the bottom line of a company. When this happens and
a business starts to grow, investors and competitors take notice.
The result is a benefit to society.
FIN534_1_12_Linda-2: Here at TFC we are always looking at
ways to improve efficiencies. We recently installed effective
work out machines that have less maintenance and are more
durable. We also have redesigned our facilities. Consequently,
the feedback from our “Body Builders” has been very positive.
By the way, our fitness members are called Body Builders…
Slide 13
Scene 13
Linda: List number 3 on the slide.
· Linda Speaks
1) More people are invested in the stock market
2) Company Efficiency

9. 3) Employees Benefit
FIN534_1_13_Linda-1: Growth is good. When companies
grow, there is also a good chance that they will see their stock
price, revenue, and employee base grow as well. TFC is a good
example of that. We have expanded from one center to one
hundred centers and have also added many new employees.
Business has been good but this expansion project is really
making me nervous. We have to keep in mind our cash flow
through this project.
Slide 14
Scene 14
Checkpoint M/C – check all that applies
What price should managers be focused on when running a
corporation?
Fundamental Price (yes)
Market Price (No)
Intrinsic Price (Yes)
Futures Price (No)
Fundamental Price – correct. Fundamental price is determined
from ALL available information known for the corporation.
Market Price (No) – Nice try but incorrect. Market price is
what investors see but there may be some information not made
available to the public that can alter the value of a corporation.
Intrinsic Price (Yes) - . Intrinsic price is determined from ALL
available information known for the corporation.
Futures Price (No) – Nice try, but incorrect. Futures price is
based on some point in time down the road and not a part of
current day pricing for a corporation.
Slide 15
Scene 15
· In comes Don
· Laugh

10. FIN534_1_15_Don-1: Hi Linda. Are you giving our Intern the
overview on financial management?
FIN534_1_15_Linda-1: Yes, Don. As a matter of fact, our next
topic is to talk about the project and cash flows.
FIN534_1_15_Don-2: Did Linda tell you how nervous she
gets when talking about cash flow? (Linda smiles)
FIN534_1_15_Don-3: You see the way a company determines
its value is “how it is able to generate cash flows now and in the
future” (insert cash symbol). It is not just about today but also
later on….forward thinking! The cash flows that we are talking
about are the “Free Cash Flows or FCF, which can be thought of
as being free to its investors and shared holders.
FIN534_1_15_Linda-2: Here at TFC, we have had a lot of
free cash flows………… But, this project is still making me
nervous…….will we still have those free cash flows? You see,
we have worked hard to build up a nice amount of cash flow for
our company. However, by us undertaking a project like this,
cash is going to be needed to help with the major expenses.
When we put an intrinsic price on TFC, we are using projected
free cash flows. If this project depletes our cash flows in the
future, we are in trouble. That is what keeps me up at
night……..
FIN534_1_15_Don-4: Linda, no need to worry. That is why
we have our Strayer Intern, to help us evaluate the project.
FIN534_1_15_Linda-3: Okay Don. But I am still
nervous…………
(They all laugh)
Slide 16

11. Scene 16
· Don in room
· Linda in room
· Ending slide
FIN534_1_16_Don-1: Linda, thanks for giving our Strayer
Intern the overview of why we are looking at the financial
management side of this project. We have never done an
analysis like this before, so it is an exciting time for everyone.
With that, I already have a job for the both of you addressing
our financial statements. And, of course, I need the results as
soon as possible.
FIN534_1_16_Linda-1: Thanks Don. We can’t wait to learn
more about this job…….
FIN534_1_16_Linda-2: Before we end for the day, let’s briefly
go over some of the important aspects that I covered today.
FIN534_1_16_Linda-3: We talked about what price a company
looks at when trying to maximize shareholder value. We are all
familiar with Market Price as it is out there for everyone to see,
but it is Intrinsic or also known as Fundamental Price that needs
managers' focus and ultimate attention. We also learned that
current and future cash flows help determine the value of a
firm. You can say that cash is the driving force behind
corporate value.
FIN534_1_16_Linda-4: I hope you enjoyed your first day.
Don’t forget to complete your weekly discussion questions
based on your learning experience today.