The Tempest

“Our revels have endeth.”

We have reached the end of a challenging yet very rewarding semester one. But the storm clouds have arrived. And (if I may quickly jump between plays) Shylock’s pound of flesh has come due. It’s exam time. And unlike Antonio, who managed to find a legal loophole, we must lift our shirts and pay what’s due.

“Of your fair flesh, to be cut off and taken
In what part of your body pleaseth me.”

Our first exam is Corporate Finance, which may explain why my brain has turned to Shakespeare to escape from all the WACC’ing it has been receiving. The Merchant of Venice does cover a lot of the core principles of finance. Bonds and repayments are key actors in the drama. OCC is a central theme. And if Antonio had carefully considered his capital budgeting, taking proper account of the risks associated with 16th century shipping to establish his risk matched discount rate, he may not have had to use as much of his equity (ie shares in his body parts) as leverage for the debt. Better capital structuring would have saved him from a potentially painful divestment. You could say it is a perfect example of Modigliani and Miller second proposition, where the return or cost of equity increases as the percentage of debt increases.

But the bigger question is, why does exam-time encourage one’s mind to wander? I have now pondered the principles of finance contained within Shakespeare’s works, but I’m pretty sure this will be of zero benefit for my exam. I will draw some solace from John Coates’ “The Hour Between Dog And Wolf”, where he notes that switching tasks or thought processes can offset mental fatigue. But I will also humbly ask our professors to consider Portia’s closing argument on behalf of Antonio…

“The quality of mercy is not strained, it droppeth as a gentle rain from heaven upon the place beneath.”

Once more unto the breach, dear MBA candidates, once more.


Christopher Upton, FTMBA, 2018/19