Approved by University Studies Sub-Committee. 


Approved by Faculty Senate 2/10/03

 

Department or Program: Finance

 

Course Number: 360

 

Semester Hours: 3

 

Frequency of Offering: Every Semester

 

Course Title: Corporate Finance

 

Catalog Description: The theory and practice of corporate finance, using the approaches and quantitative methods required of today’s financial managers and decision-makers.  Special emphasis on a theory of value, the determinants of risk, return and the opportunity cost of capital, applied to both real and financial assets, the study of leverage issues, the exploitation of market inefficiencies, and the development of various tools and economic reasoning which provide the basis for a wide range of corporate financial decisions.

 

This is an existing course previously approved by A2C2: Yes

 

This is a new course proposal: No

 

Department Contact Person: Gabriel Manrique, gmanrique@winona.edu

 

University Studies Approval is requested in: Unity and Diversity: Critical Analysis

 

Attachments: The attached sample syllabus explains what is typically covered in this course.  Several sections of this course are taught every semester.  While there may be differences in the way faculty members deliver the course, the coverage of the course is similar across sections.  The sample syllabus points out in which parts of the course the four outcomes for Critical Analysis (A through D) are covered.  This syllabus is included in this application for purposes of illustration.  Each faculty member is still responsible for his/her own course syllabus. 

 

As required by the approval process, the following address the four outcomes listed for Critical Analysis courses and documents course content and learning activities relevant to the course outcomes:

 

a.      Evaluate the validity and reliability of information.

 

Students learn to seek, use, and evaluate corporate data in this course.  The early part of the course necessarily covers the use of accounting and financial data.  Students learn which types of data are most useful for their analysis.  Eventually, as students learn the financial models especially those that deal with questions of asset valuation, students learn to check for consistency and reliability of the information that is reported by different companies and agencies.  Thus, the models in finance learned in this course, become the basis for analyzing the usefulness of information.  The course utilizes data and data bases provided by corporations and are the same type of data used in the business world.

 

 

b.     Analyze modes of thought, expressive works, arguments, explanations or theories.

 

A number of theories from both economics and finance are at the core of this course, particularly those that deal with risk and return.  These include, but are not limited to, topics such as opportunity cost, the time value of money, market clearing models, efficiency, and maximization.   Students are made to understand and analyze these theories since they lead to the formulation of the Capital Asset Pricing Model (CAPM) – the model that lies at the heart of modern day financial analysis.   Students are constantly exposed to these models and variations throughout the course.  The majority of these models tend to be highly quantitative.

 

c.      Recognize possible inadequacies or biases in the evidence given to support arguments or conclusions.

 

Part of the task of analysis in finance is to be able to sift through the information in order to arrive at conclusions that will help to maximize shareholder wealth.  Students in this course are therefore asked to examine information and assumptions closely to reduce the chance of errors in conclusions and judgments.  This is done throughout the course in the exercises and the case studies.   In addition, students are exposed to critiques of the models themselves – including the CAPM – in order that they may have a better understanding of its uses and limitations.  Such analysis is included in the build up to the models that are later used in the formal approaches to valuation, capital allocation, and financing decisions.

 

d.     Advance and support claims.

 

Students in this course must learn about making decisions with respect to asset valuation, capital budgeting, working capital, dividend policy, and capital structure.  Using data analysis and the models of corporate finance, students must learn to answer questions that include whether: an asset is correctly priced, a company’s capital structure is efficiently financed and allocated, a company’s working capital is effectively managed, and risks are adequately compensated.  In order to make proper conclusions or to support their claims, students must have the proper data, utilize the appropriate models, and analyze their conclusions. Numerous exercises and case studies during the course provide students the opportunity to do so.

 


SAMPLE SYLLABUS

 

SYLLABUS FOR FIN 360 CORPORATE FINANCE-FALL 2002

 

Professor:                              Chan-Wung Kim

 

Office:                                                 Somsen 310

 

Class Times:                                     Tuesday 6:00-8:50pm

 

Office Hours:                                      5:00pm-6:00pm Tuesday or by appointment

 

Telephone:                             507-457-2388

 

e-mail:                                                ckim@winona.edu

 

TEXT: S. Ross, R. Westerfield, and B. Jordan, Fundamentals of Corporate Finance, McGraw-Hill, 6th edition, 2003, and Spreadsheet Modeling in Corporate Finance by C. Holden, Prentice Hall, 2002.

 

COURSE OBJECTIVES:             

 

            Corporate finance is intended to provide you with a sound understanding and appreciation of the principles of corporate finance.  The course describes both the theory and practice of financial decision making by corporations, and shows how financial theory can be used to address practical problems and illuminate institutional aspects of the financial world.  The course will emphasize the valuation of financial assets in a risk-return framework, and will help you understand how capital markets operate.   Specific topics to be covered include the concept of NPV and its application to capital budgeting, investments, portfolio theory and the CAPM, dividend policy, debt policy (optimal capital structure), the valuation of financial securities (common stock and debt), and short-term financing.  In the process you should develop ability and methodological skills that will enable you to address a variety of complex real-world financial problems.

 

UNIVERSITY STUDIES: CRITICAL ANALYSIS

 

            This course fulfills the three semester hours of Critical Analysis required under the Unity and Diversity component of the University Studies Program.  As such it seeks to include requirements and learning activities that promote students’ abilities to:

 

a. evaluate the validity and reliability of information;

b. analyze modes of thought, expressive works, arguments, explanations, or theories;

c. recognize possible inadequacies or biases in the evidence given to support arguments or conclusions; and

d. advance and support claims.

 

The “Tentative Course Outline and Class Schedule” below identifies these outcomes in parenthesis.

 

MODE OF INSTRUCTION AND PREPARATION:

 

            The course will use a mixture of lectures and text reading assignments, supplemented with case analysis to better appreciate the application of theoretical concepts and tools to various real-world financial situations.  Selected problems will be assigned for homework and evaluated regularly as a progress feedback.

 

            Each day you will be assumed to have done the required reading and you should come to class prepared to discuss the material with others so that the concepts are understood and reinforced.  You should also use class as an opportunity to ask questions about what you have read and share with others your understanding and/or queries about the material.

 

REQUIREMENTS:

 

CASE:  Students will be assigned one case.  This case will enable you to analyze real world financial problems faced by corporate managers.  You will be expected to work in groups.  Group formation and division of labor within the group is entirely your responsibility.  Each member of any group will receive the same grade as that assigned to the group as a whole for the cases.  Groups should not consist of more than four members each.  There should be no collaboration between groups.

 

EXAMS:  There will be one mid-term exam and one final exam.  The exams will consist of a series of multiple choice questions and some full response questions.   The schedule for the exams is as follows:

 

                         Mid-term Exam  : Tuesday, October 15

                        Final Exam:  TBA

 

There are no provisions for make up exams.  It is imperative that your schedule permits you to take the exams at the above mentioned date and time.

 

COURSE EVALUATION:

 

            Your performance in the course will be evaluated based on written exams, selected homework problems, attendance, quizzes and your written case analyses.   The relative weights of each are:

 

            Midterm Exams                                                     35%

            Final Exam                                                            40%

            Case Analysis                                                         10%

            Attendance, Participation and quizzes                          15%

 

Important:  Please note that there will be no incompletes given out.

 

TENTATIVE COURSE OUTLINE AND CLASS SCHEDULE

 

Week 1: Sep. 3

           

Class discussion:

            Ch. 1    Introduction/Overview (A, B)

                       

            Ch. 2    Accounting Statements and Cash Flow (A)                        

 

 

 

Week 2: Sep. 10

 

Class discussion:

            Ch. 5    How to Calculate Present Values (A,C)

                        Assigned questions:  1-20

                       

            We will discuss one of the central notions in finance, namely, the time value of money.  We should develop a working familiarity with some of the algebra, which will be heavily used throughout the rest of class.

 

Week 3: Sep. 17

 

Quiz on the time value of money

 

Class discussion:

                        Ch. 6      Discounted cash flow valuation (A,C)

                                                Assigned questions: 1-75

 

Week 4: Sep. 24

 

Class discussion:

            Ch. 7    Interest rate and Bond Valuation (C,D)

                        Assigned questions:  1-29

           

We will discuss basic principles underlying the valuation of financial assets such as bonds and stocks.  Here you can easily apply the concept of the time value of money to the security valuation.

 

Week 5: Oct. 1

 

Quiz on bond valuation

 

Class discussion:

            Ch. 8   Stock valuation (C, D)

                        Assigned questions:  1-22

 

Week 6: Oct. 8

 

Quiz on stock valuation

 

Class discussion:

            Ch. 12 Capital Market Theory: An Overview (A, B, C)

                        Assigned questions: 1-18

 

Week 7: Oct. 15

 

Mid term exam

 

 

 

 

Week 8: Oct. 22

 

Class discussion:

                        Ch 13    Risk and return (B, C)

                                    Assigned questions: 1-27

 

            Unlike earlier chapters, we introduce uncertainty.  We will briefly discuss the portfolio theory and examine the relationship between expected returns and risk.  In market efficiency, we will discuss the notion of capital market efficiency, which has held a central position in finance.  We will also discuss the implications of different forms of efficiency and review some of the empirical evidence.

 

Week 9: Oct. 29

           

Quiz on risk and return

 

Class discussion:

            Ch. 9   Capital Budgeting: NPV vs. Other Criteria (B, C, D)

                        Assigned questions:  1-23

                       

            We will first examine the various techniques used in capital budgeting, such as payback, IRR and NPV, and look at the pros and cons of each. We will then examine the concept of cash flows for capital budgeting and its intricacies.

 

Week 10: Nov. 5

 

Case Assigned: Super project

 

Class discussion:

            Ch. 10    NPV and Capital Budgeting (C, D)

                        Assigned questions:       1-15

 

Week 11: Nov. 12

 

Class discussion:

            Ch. 17   Capital Structure (C, D)

                        Assigned questions:  1-27

 

            The class so far has implicitly assumed that the firm is all-equity financed.  In practice, firms employ many different financing methods.  It will raise questions about the impact of capital structure on the value of a firm.  We will begin a discussion of the Modigliani-Miller propositions.

 

Week 12: Nov. 19

                       Case Discussion

 

Class discussion:

            Ch. 15   Cost of capital (C, D)

                        Assigned questions:  1-23

 

 

 

Week 13: Nov. 26

 

Class discussion:

            Ch. 18   Dividend Policy (C, D)

                        Assigned questions: 1-18

               

                        We will discuss the effect of dividend policy on firm value.

 

Week 14: Dec. 3

 

Class discussion:

            Ch. 19 Short-term financial planning (C, D)

                        Assigned questions: 1-17          

                       

            Ch. 20 & 21 Working capital management (C, D)       

                        Assigned questions: 1-10 (Ch. 20) & 1-5 (Ch. 21) 

 

Week 15: Dec. 10

 

Class discussion:

                        Review

 

Week 16: Dec 16-19

            Final Exam