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Home About Contact Papers Courses Weird Oddprose Opinions |
Jamal Munshi PhD, All rights reserved |
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The course The mission of corporate managers is to maximize the wealth of shareholders. To carry out this function they must understand the fundamental concepts of valuation in Finance and be able to apply them in managing the cost of capital, the optimal capital budget, and growth. They do this in the context of long term policy decisions involving capital structure and dividend payout. Financial managers of corporations must understand financial statements and be able to use the information in those statements to gain insight into the financial performance of the firm. This course is designed to prepare the student for this role. Students are expected to have completed courses in the fundamentals of finance, accounting, and statistics. The course is quantitative in nature and it requires proficiency in mathematics and in Microsoft Excel. Proficiency in written English is also important. Textbook Brigham and Ehrhardt, Financial Management Theory and Practice Thompson South-Western, ISBN 0324259689 Classroom activities There are 8 class meetings on 8 consecutive weeks, one day per week, and one scheduled final examination period. There may be up to three activities per meeting Activity #1: Quiz on previous topic: 1 hour Activity #2: Lecture on new topic: 1.5 hours Activity #3: Workshop on new topic: 1.5 hours Workshops and quizzes utilize selected problems from the assigned problem set. Students are requested to complete the reading assignment for Workshop #1 prior to the first class meeting. Assignment due dates Workshops are due at the end of the workshop period but may be turned in later at any time prior to the next quiz for half credit. Quizzes are due at the end of the quiz period but may be turned in later at any time prior to the next quiz for comments but not for credit. The term project may be turned in at any time prior to the scheduled final examination. Meeting #1 Workshop #1: Risk and return Reading assignment: Chapter 4, investment returns, stand-alone risk, probability distributions, expected rate of return, standard deviation, portfolio returns, portfolio risk, diversifiable risk, market risk, beta risk, covariance Assigned problem set: Problems 4.1 - 4.13 (answers on page 943) Meeting #2 Quiz #1: Risk and return Workshop #2: Stock valuation Reading assignment: Chapter 7, common stock definition, common stock valuation, the constant growth model, non-constant growth models, market multiples, market equilibrium, the efficient market hypothesis, preferred stock Assigned problem set: Problems 7.1 - 7.14 (answers on page 944) Meeting #3 Quiz #2: Stock valuation Workshop #3: Cost of capital and capital budgeting Reading assignment: sections Chapter 9, weighted average cost of capital, cost of debt adjusted for taxes, cost of preferred stock, cost of common stock, the CAPM approach, the DCF approach, WACC computation, use, and mgt, estimating WACC for divisions and projects, flotation costs, Chapter 10, NPV, IRR, unequal lives, OCB, capital rationing Assigned problem set: Problems 9.7 - 9.15 and 10.2,4,7,8,12,14(answers on page 944 and 945) Meeting #4 Quiz #3: Cost of capital and capital budgeting Workshop #4: Capital budgeting topics Reading assignment: Chapter 11, relevant cash flows, estimating cash flows, project risk analysis, simulation and scenario analysis methods. Assigned problem set: Problems 11.1 - 11.8 (answers on page 945) Meeting #5 Quiz #4: Capital budgeting topics Workshop #5: Analysis of financial statements Reading assignment: Chapter liquidity ratios, asset mgt ratios, debt mgt ratios, profitability ratios, market value ratios, DuPont analysis Assigned problem set: Problems 13.1 - 13.11 (answers on page 945) Meeting #6 Quiz #5: Analysis of financial statements Workshop #6: Financial planning Reading assignment: Chapter 14, percent of sales method with constant balance sheet ratios, pro-forma financial statements, additional funding needs, changing balance sheet ratios Assigned problem set: Problems 14.1 - 14.9 (answers on page 945) Meeting #7 Quiz #6: Financial planning Workshop #7: Valuation of the firm Reading assignment: Chapter 15, free cash flow, value of operations, price per share, value based management, maximize shareholder wealth, Assigned problem set: Problems 15.1 - 15.10 (answers on page 945 and 946) Meeting #8 Quiz #7: Valuation of the firm Workshop #8: Working capital management Reading assignment: sections Chapter 22, cash budget, cash management, inventory management, receivables management, methods of short term financing Assigned problem set: Problems 22.1 - 22.13 Scheduled final examination period Quiz #8: Working capital management Semester project Presentation and report on a Spreadsheet Problem of your choice. Assignment types The class is divided into groups. Workshops and semester projects are group assignments. They are carried out cooperatively by group members working as a team. The instructor serves as an ex-officio member of each group. Quizzes and examinations are individual assignements. Please do these on your own. You are expected to complete your quiz without using your book or notes. For group assignments submit one paper per group. For individual assignments submit one paper per student. Missed workshops and quizzes Once per term, the student may carry the weight of a missed workshop forward to the next workshop. Once per term, the student may carry the weight of a missed quiz forward to the next quiz. There is no provision for make-up workshops or quizzes. Evaluation of learning 8 Workshops x 4 points each = 32 points 8 In-class short quizzes x 8 points each = 64 points Semester project = 4 points Total = 100 points Letter grade: 90-100 = A, 80-90 = B, 75-80 = B-, 60-75 = D, else F Outcomes After completing this course you should be able to
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