College of Commerce and Finance
Master of Business Administration
Professor: Dr. A. DeMaskey
Office: 2017 Bartley Hall
Office hours: 5:30-6:00 Wednesday and by appointment
Basic business problems and tools of financial decision-making, including present value techniques,
capital budgeting and cost of capital, asset management, introduction to the theory of portfolio
management and capital asset pricing.
The prerequisites for this course are MBA 8101 Financial Accounting and MBA 8502 Statistical
Analysis or equivalents. It is the student’s responsibility to be certain that the prerequisites have been
successfully completed. If at any time during the semester it is determined that a student has not
completed the prerequisites, the student can be administratively dropped from the course without credit
or tuition refund.
The course is designed to provide students with an overview of the basic principles and concepts of
financial management, with particular emphasis on risk, rates of return, and valuation. It also provides
an overview of contemporary financial events as they occur and gives students the opportunity to use
spreadsheets in a financial management setting as well as practice written communication skills. The
course will focus on theories, concepts, and principles as opposed to institutional material, although
some institutional background is required. Since this course is required of all MBA students, a great
deal of material will be covered, but in-depth treatments will be left to follow-on courses.
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By the end of this course, you will have done, or be able to:
• State the goals and functions of financial management.
• Use financial ratio analysis to assess the relative strengths and weaknesses of a company.
• Measure financial risk and determine financial return using quantitative methods.
• Use time value of money analysis to assist in making investment decisions.
• Estimate a firm’s weighted average cost of capital.
• Explain how financial managers decide to use debt and equity instruments for long-term
• Determine the optimal levels of working capital.
• Describe the derivative instruments used in corporate risk management.
• Differentiate between multinational and domestic financial management.
Texts. Eugene F. Brigham and Michael C. Ehrhardt’s Financial Management: Theory and Practice,
10 Edition, published by Harcourt College Publishers Press (2002). This text will be supplemented by
relevant readings from a variety of sources, including the Wall Street Journal, Financial Times,
Barron’s, and Business Week. In addition, Harcourt offers a companion web site as a supplemental
learning resource: http://emerson.thomsonlearning.com/finance/theory10e/sitesources.html.
Exams. The final exam will be given in class. The two midterm exams will be completed outside of
class, but will need to be submitted by the due date. A hard copy of the exam must be turned in. You
will be penalized for late submission.
Assignments. Several problem-solving assignments from the end-of-chapter problems including
spreadsheet problems will be given during the semester to ensure the learning of the concepts covered in
the course. These problems have been noted in the course schedule. Specific instructions and due dates
for these problems will be announced in class as well as posted on the web at least one week before the
due date. It is your responsibility to keep track of the assignments and their due dates. The assignments
will be graded based on completeness and accuracy and are worth 10% of your course grade. Hard
copies of the assignments should be turned in. You will lose points for late submission of assignments.
Project. Each student is expected to complete a project with the objective of estimating a firm’s cost
of capital. Students will be required to collect background information on a firm, gather relevant data
and perform a detailed analysis to calculate the cost of capital of a non-financial corporation.
Instructions for the project will be handed out separately. Failure to submit the project by the due date
will result in a lower grade.
Class Participation. Class sessions will consist of discussions relating to the assigned chapter
readings and exercises, mini cases, and current events. Thus, student participation in class discussions is
extremely important. You are expected to participate in these discussions in a meaningful way, which
requires you to be fully prepared at all times.
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Class Attendance. You are expected to attend each regularly scheduled class. Please note that exam
questions are taken from lecture material, the text, relevant readings, and current events. Thus, absences
tend to reduce exam performance and, consequently grades.
Calculator. While we will be using Excel to solve finance problems, it is also recommended that
you have access to a financial or business calculator. Be sure that the financial calculator you use has a
“Cash Flow or CF” key to perform NPV and IRR calculations.
Grades will be based on relative performance and determined as follows:
Final Exam (comprehensive) 25%
Midterm Exam (2 @ 20%) 40%
The following grading scale is used to determine your final course grade:
A 94%-100% B+ 87%-89% B- 80%-82% C 70%-74%
A- 90%-93% B 83%-86% C+ 75%-79% F < 70%
1. Students should come prepared to each class meeting by reading ahead the materials to be
covered in class, so as to ask questions and participate in class discussions.
2. Students must take the responsibility for learning the course material specified in the syllabus by
reading the text and relevant current event articles, reviewing the Power Point slides and the
chapter(s) learning objectives, and taking the in-class quizzes.
3. Students are encouraged to review the self-test questions and end-of-chapter questions and solve
as many problems as possible from the end of each chapter.
4. All assignments and the project must be submitted by the due dates specified for each.
5. Email and homepage should be checked regularly for any updates, announcements or
instructions concerning the course.
• Attendance Policy. Participation points can be earned in a number of different ways, including
attending class, completing one-minute papers and in-class exercises as well as active
participation in class discussions of assigned readings, problems and mini-cases. Any unexcused
absence will lower your participation score. Your absence is considered ‘excused’ if it is
unavoidable and if I am notified at least 24 hours in advance. If your absence is excused you
will neither gain nor loose participation points.
• Make-Up Exam Policy. As a general rule, there will be no make-up exam.
• Late Submission Policy. Any work submitted after the deadline will loose 10% of its full credit
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• Disability Fairness Policy. It is the policy of Villanova to make reasonable academic
accommodations for qualified individuals with disabilities. If you are a person with a disability,
please contact me after class or during office hours and make arrangements to register with the
Learning Support Office by contracting 610-519-5636 or firstname.lastname@example.org as soon as
possible. Registration is needed in order to receive accommodations.
• Academic Integrity and Policy Code. The Code of Academic Integrity of Villanova University
addresses cheating, fabrication of submitted work, plagiarism, handing in work completed for
another course without the instructor’s approval, and other forms of dishonesty. For the first
offense, a student who violates the Code of Villanova University will receive 0 points for the
assignment. The violation will be reported by the instructor to the Dean’s Office and recorded in
the student’s file. In addition, the student will be expected to complete an education program.
For the second offense, the student will be dismissed from the University and the reason noted
on the student’s official transcript.
Schedule of Topical Coverage:
Week 1 August 27, 2003
Course Introduction: Review of syllabus, course requirements, and student
Topic: Overview of Financial and Multinational Financial Management
Description: Finance is the application of economic principles and concepts to business
decision-making and problem solving. We will examine the primary areas of finance, the
different forms and sizes of businesses, the financial goal of the firm, the important trends
in finance, the role of ethics and social responsibility, and the agency relationship.
Read: Chapters 1 and 27 (pp. 1015-1019)
Week 2 September 3, 2003
Topic: Financial Planning and Forecasting
Description: Accounting is called the language of finance. We will review the basic
financial statements, cash flows, and the federal income tax system. Next, we will
discuss techniques used by investors and managers to analyze financial statements.
While it is clearly important to understand past performance, both managers and
investors must look ahead and anticipate what is likely to happen in the future.
Read: Chapters 2, 3 and 4
Work: Problems 2-7, 9, 15; 3-15, 17 (use the file Ch 03-17 Build a Model.xls); and 4-11
(use the file Ch 04-11 Build a Model.xls)
Week 3 September 10, 2003
Topic: The Global Financial Environment
Description: Financial managers need to understand the economic environment and
markets within which they operate. As world economies become more integrated, the
role of multinational corporations is increasing. Thus, we will examine the nature of
global financial markets, the types of institutions that operate in these markets, the
determination of interest rates and exchange rates, and the effect interest rates have on
Read: Chapters 5 and 27 (pp. 1025-1035)
Work: Problems 5-6, 10, 15 (use the file Ch 05-15 Build a Model.xls)
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Week 4 September 17, 2003
Topic: The Basics of Risk and Return
Description: Investors generally dislike risk. Thus, a higher risk security must offer a
higher return. We will explore the trade-off between risk and return and examine the
procedures used to measure risk and return for both individual assets and portfolios.
Read: Chapters 6 and 7 (pp. 248-251)
Work: Problems 6-8, 11, 17 (use the file Ch 06-17 Build a Model.xls)
Week 5 September 24, 2003
Topic: Time Value of Money
Description: Most financial decisions involve the payment and receipt of dollars at
different points in time. This difference is recognized and accounted for by the
discounted cash flow analysis. We will examine the basic mathematical techniques used
to translate the value of one or more cash flows from one period to another.
Read: Chapter 8
Work: Problems 8-14 (use the file Ch 08-30 Build a Model.xls), 20
Midterm Exam 1 handed out
Week 6 October 1, 2003
Topic: Bond Valuation
Description: While bonds are relatively safe investments, investors can certainly lose
money on them. We will examine the different types of bonds, the types of risks to
which investors and issuers are exposed, and the procedures used to determine the value
and rates of return on bonds.
Read: Chapter 9
Work: Problems 9-15, 19 (use the file Ch 09-19 Build a Model.xls)
Midterm Exam 1 Due
Week 7 October 8, 2003
Topic: Stock Valuation
Description: The cash flows on common stocks are more difficult to predict than the cash
flows received on bonds. We will examine models that can be used to estimate the true
or intrinsic value of a common stock.
Read: Chapter 10
Work: Problems 10-14, 15, 22 (use the file Ch 10-22 Build a Model.xls)
Week 8 October 22, 2003
Topic: The Cost of Capital
Description: The cost of capital is a critical element in business decisions. We will
explore the determination of the cost of capital, which provides an important framework
for both investment and financing decisions.
Read: Chapter 11 (pp. 419-438, 445-452) and Mini Case (p. 458)
Work: Problems 11-12, 18 (use the file Ch 11-18 Build a Model.xls)
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Week 9 October 29, 2003
Topic: The Basics of Capital Budgeting: Evaluating Cash Flows
Description: Investment opportunities available to firms need to be evaluated in terms of
whether they will increase the value of the firm. We will explore various techniques used
in the capital budgeting analysis.
Read: Chapter 13 and Mini Case (p. 542)
Work: Problem 13-29 (use the file Ch 13-29 Build a Model.xls)
Week 10 November 5, 2003
Topic: Cash Flow Estimation
Description: The most important and most difficult step in the capital budgeting process
is the estimation of cash flows. We will develop a framework for analyzing a project’s
cash flows and risk.
Read: Chapters 14 (pp. 546-563) and 27 (pp. 1035-1039)
Work: Problems 14-6, 11 (use the file Ch 14-11 Build a Model.xls)
Midterm Exam 2 handed out
Week 11 November 12, 2003
Topic: Capital Structures: The Basics
Description: When a firm expands, it needs capital, which can come from debt or equity.
The combination of debt and equity is called capital structure. We will explore the
determination of the optimal capital structure as well as examine the effects of financial
leverage on the stock price, earnings per share, and the cost of capital.
Read: Chapters 16 and 27 (pp. 1040-1041)
Work: Problem 16-4
Midterm Exam 2 Due
Week 12 November 19, 2003
Topic: Dividend Policy
Description: Successful companies earn income, which can be reinvested or distributed to
stockholders. We will examine the firm’s optimal dividend policy and the factors that
affect the dividend policy decision.
Read: Chapter 18
Week 13 December 3, 2003
Topic: Current Asset Management and Short-Term Financing
Description: Working capital policy involves decisions related to current assets. We will
examine the management of current assets, specifically cash, marketable securities,
inventory, and accounts receivables. Any decisions related to current assets include
decisions about financing them. We will examine and evaluate alternative sources of
short-term financing as well as alternative current asset financing policies.
Read: Chapters 22, 23 and 27 (pp. 1041-1044)
Work: Problem 23-17
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Week 14 December 10, 2003
Topic: Derivatives and Risk Management
Description: The greatest growth and development in the last two decades has been in the
area of derivatives. We will explore the basic principles of corporate risk management
and the derivative instruments used in terms of a general description.
Read: Chapter 24
Work: Problem 24-4a,b (use the file Ch 24-4 Build a Model.xls)
Week 15 December 17, 2003
FINAL EXAM (7:00 p.m.)
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