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FINC 396 Corporate Finance

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    FINC 396 Corporate Finance FINC 396 Corporate Finance Document Transcript

    • FINC 396 Corporate Finance June 2009 (08/55) FINC 396 Online Course Syllabus Course Description FINC 396 Corporate Finance Analysis of financial and accounting information and its impact on financial decision-making and profit planning. Topics include: financial planning and control tools, leverage and capital structure, investment banking, dividend policy, corporate restructuring, risk management and international financial management. Prerequisite: Acct 281, Math 150 or Math 170 I. Overview and Course Goals Welcome to Corporate Finance (FINC 396) on line. In this course we will analysis financial and accounting information and its impact on financial decision-making and profit planning. Some of the topics will include: financial planning and control tools, leverage and capital structure, investment banking, dividend policy, corporate restructuring, risk management and international financial management. Each student will leave the course with an appreciation of corporate finance and a comprehensive overview of how corporate finance works and how corporate finance affects every aspect of business. You will work individually and as teams throughout the course. Each week we'll focus on different situations, issues, or case studies encountered in the workplace through our online discussions; these are reinforced and expanded in readings in our text. During Week 1, we will focus on defining finance and describing the major areas and career opportunities within the industry. We will review basic business organizations and their strengths and weaknesses. We will look at the activities of the financial manager and wealth maximization. You will learn about the relationship between financial institutions, markets and how they effect financial decisions. We will learn about stocks and bonds, rights, preferred stocks and basic relationships of risk and return. We will review financial statements, taxation, depreciation, cash flows and we will start applying financial statement analysis to the decision making process. During Week 2, our activities will help you understand Time Values of Money and how they effect the decision making process for a financial manager. We will identify the general sources of risk, and relationships between securities that will achieve diversification in your portfolio. We will look at the different tools for analysis of return that help us to differentiate between expected and realized returns. We will focus on the components of an investor’s required rates of return, the difference between required and expected rates or return, and determine what makes up a stock's price, or stock valuations using simple present value models, P/E ratios, price to sales ratios and price to book ratios. You will be able to differentiate between simple price-weighted,
    • value-weighted, equal-weighted and geometric average rates of returns on common stock. We will use these valuations to identify financial goals and how these assets can meet those financial goals. During Week 3, our projects will help us learn key capital budgeting terminology, capital expenditure motives and the steps in the capital budgeting process. We will also examine the role of capital budgeting techniques (Net Present Value "NPV", Internal Rate of Return "IRR" and Payback method in the capital budgeting process). We will also analyze the risk-adjusted techniques in the capital budgeting process and refinements in the evaluation process. During Week 4, we will focus on the assumptions, concepts and specific sources of capital underlying the companies’ cost of capital. We will determine weighted average costs of capital, the best capital structure for the companies long--term investment options and the rationale behind these decisions. We will also review the relationship between economic activity, monetary policy, money supply, open market activities by the Federal Reserve and how this affects securities prices. We will also look at security selection using analysis of financial statements and security selection. During Week 5, our activities will help you understand and explain the common features of different types of marketable securities. You will be able to ascertain the sources of risk to common stock and bond securities, determine prices for marketable securities, current yield, yield to maturity and yield to call's. We will analyze working capital, short-term financing tools and strategies, the costs and management of accounts receivables and inventory levels. During Week 6, our class activities will help you understand the basics of options, option's market value and its intrinsic value. We will look at different options strategies and option valuation models, (Black/Scholes). You will determine the potential profit and losses from option strategies. We will look at the role of commodity futures markets and distinguish between hedger and speculators, and the role each plays. During Week 7, we will look at merger fundamentals, including basic terminology and motives for mergers. We will look at the objectives and procedures used in leveraged buyouts and business divestitures. You will also be expected to understand the types and major causes of business failures. During Week 8, we will focus on the major factors influencing the financial operations of multinational companies. We will discuss the effects of currency fluctuation and some basic hedging techniques. During the final week we emphasize the importance of tying the whole learning experience around corporate finance and putting it into practice. We will identify goals and objectives in corporate finance practices. You will have the basics for making investment decisions and individual security selections. You will have a basic understanding of time values of money and risk and returns around investment decisions. II. Course Objectives To introduce the subject of corporate financial management. To identify factors that impact financial decision-making, implementation and evaluation. To introduce the student to the planning and control tools of corporate finance. To analyze leverage and its effect on optimal capital structure. To describe the basic concepts of investment banking and the services investment bankers provide. To investigate dividend policies and dividend-payment procedures. To explore mergers and other forms of corporate restructuring including bankruptcy.
    • To describe the types of risks that can adversely affect a firm's cash flows and explain how a firm might choose to hedge those risks. To list the types of risks that multinational corporations face when they conduct business in different countries and currencies. Measureable Learning Outcomes Describe and explain why conflicts of interest may arise in large organizations and dicuss how corporations can provide incentives for everyone to work toward a common end. Describe and explain key measures of firm performance such as market value added and economic value added. Estimate valuation of a company using the free cash flow approach. Describe and explain the potential problems that can arise when management of the corporation and ownership are separate (i.e., the agency problem). Describe and explain corporate governance and the underlying issues of social responsibility. Explain the impact of growth on the firm's balance sheet and the role of the sustainable growth model as a planning device. Describe the cash conversion cycle, the firm's objectives with regard to it, and the actions the firm can use to accomplish these objectives. Explain the role of pro forma financial statements in the financial planning process. Explain the role of the cash budgeet in planning and monitoring the firm's cash inflows and outflows. Explain the key concerns of the financial manager with regard to managing inventory and accounts receivable. Describe and explain the purpose and makeup of financial markets and institutions. Describe the major classes of securities issued by firms to raise capital. Explain the basic choices that corporations face in raising long-term financing. Describe the costs and benefits of raising long-term funds by issuing securities in the capital market. Describe the basic issuance and pricing pattern observed in the initial public offerings (IPO) market and the seasoned equity offerings market. Describe and explain the implications of market efficiency for a firm's financial decisions. Summarize recent trends in the use made by firms of different sources of capital. Describe and explain how firms' make initial public offerings and the costs of such offerings. Explain the role of the underwriter in an issue of securities. Explain how financial leverage increases both a firm's risk and its returns. Describe and explain operating leverage and financial leverage, and the potential effect each had on a firm's cost of capital. Explain how corporate and personal taxes affect capital structure decisions. Analyze the effect of debt financing on the risk and required return of equity holders. Explain how the costs of bankruptcy and financial distress affect capital structure decisions. Explain the fundamentals of dividends, including payment procedures, types of policies and other forms of dividends. Describe how dividends are paid and how companies decide on dividend payments.
    • Describe the most important characteristics of long-term debt financing, such as the factors that influence its cost and the covenants lenders include to protect their investments. Explain how a corporation decides whether to refund an existing bond issue by exercising a call option. Explain the difference between operating leases and capital, or financial leases. Describe the steps involved in deciding whether to purchase an asset through a lease or by borrowing the money required to purchase the asset. Explain how companies can use options, futures, and forward contracts to reduce risk. Explain how companies can use swaps to change the risk of securities that they have issued. Describe the difference between fixed and floating exchange rates. Describe ways that companies change their ownership or management. Explain why it may make sense for companies to merge and the gains and costs to the acquiring firm. Describe takeover defenses. III. Course Policies Student Conduct The instructor reserves the right to manage a positive learning environment and thus will not tolerate inappropriate conduct in the course. All Columbia College students, whether enrolled in a land-based or online course, are responsible for behaving in a manner consistent with Columbia College's Code of Student Conduct and Ethics Code for Computer Users. Students violating these codes will be referred to the Campus Life Office for possible disciplinary action. The Code for Student Conduct and the Ethics Code for Computer Users can be found in the Columbia College Student Handbook, a copy of which can be obtained by calling the Campus Life office at 573 875 7425. Student manual http://www.ccis.edu/online/studentmanual / Course demonstration: http://www.ccis.edu/online/demo.asp. eServices If you have trouble or need help setting up your eServices account or trouble with your CougarMail account: Help desk email CCHelpDesk@ccis.edu, or 1-800-231-2391 x4357 Desire2Learn For problems within this course please contact D2L help desk # 519-772 0322 or 877-325-7778, or their email, helpdesk@desire2learn.com. Non-Discrimination/ADA Policy There will be no discrimination on the basis of sex, race, color, national origin, sexual orientation, religion, ideology, political affiliation, veteran status, age, physical handicap, or marital status. Students with documented disabilities who may need academic services for this course are required to register with the Coordinator for Disability Services at 573-875-7626. Until the student has been cleared through the disability services office, accommodations do not have to be granted.
    • It is vital if you are a student who has a documented disability to read the entire syllabus before signing up for the course. The structure or the content of the course can make an accommodation not feasible. The policies and related syllabus matters remain subject to change in the event of extenuating circumstances. Online Participation Students are expected to devote a minimum of five hours per class week logged on to the computer conferencing system-the same amount of time you'd spend in the physical classroom. You should also expect to spend a minimum of five hours per week off-line in preparation, study and research. See "Ground Rules for Online Participation" for additional information. A class week is defined as the period of time between Monday and Sunday. The first week begins the first day of the semester, June 1, 2009 and ends midnight the following Sunday, June 7, 2009. Assignments scheduled for completion during a class week should be completed by Sunday of the week assigned. Writing assignments and formal papers MUST be completed and successfully submitted by the due date. If assignments are not completed by the Wednesday following the due date, and you don’t have permission from me for an extension, you will get a (0) for that weeks assignment. No late assignments will be accepted without my approval. This applies to all assignments and papers submitted online. NOTE: Because this is an online course designed to get feedback on assignments to you directly via Internet, you must make prior arrangements with me before submitting a paper via fax or the postal service. If you ever have problems transmitting your assignments to me, telephone me immediately, and we'll get the problem solved. Ground Rules for Online Participation Students should use E-Mail for private messages to the instructor and other students. The Class Discussion is for public messages. Students are expected to complete 4 hours per week of conferencing or other appropriate online activities, including sending/receiving E-mail and navigating and conducting research over the World Wide Web. All students will participate in discussion. Conventions of "online etiquette," which include courtesy to all users, will be observed. Students may get assistance with computer-related problems through the instructor. Students will normally submit papers or files uploaded to the computer and routed to the instructor. Assigned papers may be submitted via the postal service or fax only if arrangements are made with the instructor beforehand. ACADEMIC HONESTY All Columbia College policies are in effect as described in the Academic Dishonesty/Misconduct section of the current college Catalog. All your work must be your own unless collaboration has been authorized. If collaboration is authorized you must acknowledge the collaboration in writing.
    • Your grade will be based in large part on the originality of your ideas and your written presentation of these ideas. Presenting as one's own the words, ideas, or expression of another in any form is cheating through plagiarism. If you are unsure what constitutes plagiarism, review the rules of original writing at the following web site: http://owl.english.purdue.edu. This site provides valuable information, including examples about plagiarism. To review some plagiarism tools available to students, take a look at http://www.schoolsucks.com and www.termpapersites.com The content of these plagiarism sites would, if you were lucky, get you a "D" in this course if you were not caught. It is substandard work indeed, but you will almost always be caught if you try to cheat, due to the plagiarism prevention tools available to instructors. Here are two sites that may be of interest: http://www.indiana.edu/~istd and http://www.plagiarism.com.Plagiarism will not be tolerated and the claim of ignorance is no excuse. Those found plagiarizing may fail the course. Collaboration with other students is not permitted without explicit permission from the instructor. This is a form of plagiarism. Roommates and spouses taking the same course should be particularly careful. Grading Policy: Grades will be available by Wednesday after the end of class. Grading Scale: A 90% to 100% 900 –1000 points B 80% to 89.9% 800 – 899 points C 70% to 79.9% 700 – 799 points D 60% to 69.9% 600 – 699 points F 59.9 and below 599 and below. Each student is responsible for: Completing weekly Reading assignments. Completing Weekly Discussion Questions and an Online Journal and submitting the journal to the instructor on dates specified by the instructor. Completing writing assignments, referred to as Papers. Completing a Final Examination. IV. Grades Assignment Points Due Date Week 1: Introduction to Managerial Finance Read the integrative case study, "Track Software, Inc." and answer the questions in the weekly “Quiz.” 100 pts 06/07/09 Discussion Assignment: I will post a question related to a current topic in the discussion, than post your answers in the weekly discussion.
    • Week 2: Important Financial Concepts Read the integrative case study, "Encore International" and answer the questions at the weekly “Quiz.” 100 pts 06/14/09 Discussion Assignment: I will post a question related to a current topic in the discussion, than post your answers in the weekly discussion. Week 3: Long-Term Investment Decisions Read the integrative case study, "Lasting Impressions Company" and answer the questions at the weekly “Quiz.” 100 pts 06/21/09 Discussion Assignment: I will post a question related to a current "long-term investment decision making process.” Week 4: Long-Term Financial Decisions Read the integrative case study, "O'Grady Apparel Company" and answer the questions at the weekly “Quiz.” 100 pts 06/28/09 Discussion Assignment: Please search the internet for Capital Market Line and answer the question in the weekly discussion. Week 5: Short-Term Financial Decisions Read the integrative case study, "Case De Diseno" and answer the questions at the weekly “Quiz.” 100 pts 07/05/09 Discussion Assignment: Please search the internet for Asset Allocation and answer the question in the weekly discussion. Week 6: Derivatives and Options Read the case study, "Financing L. Rashid Company's Chemical-Waste-Disposal System" and answer the questions at 100 pts 07/12/09 the weekly “Quiz.” Discussion Assignment: Please search the internet for Derivatives and answer the question in the weekly discussion. Week 7: Mergers, LBO's, Divestitures and Business Failures Read the case study, "Deciding Whether to Acquire or Liquidate Procras Corporation" and answer the questions at the end of the 100 pts 07/19/09 weekly “Quiz.” Discussion Assignment: Please search the internet for Business Failure Record. I will post a question related to a current topic in the discussion, than post your answers in the weekly discussion. Week 8: International Managerial Finance Read the integrative case study, "Organic Solutions" and answer the questions and the end of the weekly “Quiz.” 100 pts 07/25/09 Discussion Assignment: I will post a question related to a current a current "International Finance" situation.
    • Annual Report Project: Your Annual Report Project is due. 200 pts 07/25/09 1000 Total pts V. Required Texts Principals of Managerial Finance 12th Edition, Gitman, Addison Wesley, ISBN# 0-321-52413-6. Click on the MBS Book Link to purchase a book or call 1-800-325-3252. Have your course name and number ready. You can pay by credit card or check. Books may be resold to MBS after the course is completed. SUGGESTED ADDITIONAL READING: Wall Street Journal, Journal of Finance, Financial Management, The Journal of Finance and Quantitative Analysis, other financial journals as desired. Students: Please note that the use of an eBook carries certain risks: information may be missing due to copyright restrictions, the book cannot be resold to MBS, and an eBook purchase cannot be refunded. | VI. Course Schedule Week 1: Introduction to Managerial Finance Readings: Text: Gitman: Chapter 1: Text: Gitman: Chapter 2: Text: Gitman: Chapter 3: Class Activities: Read the integrative case study, "Track Software, Inc.", page # 152. • Online Discussion Assignment: I will post a question related to a current topic in the discussion, than post your answers in the weekly discussion. • Weekly Discussion Question: Link to the Discussion • After you finish the case for Week 1, Please go to the “Quiz” section of the course website and take the test for this week’s case. • Every business administration course includes a written project: Begin thinking about what company you are interested in doing an annual report analysis on. Please send me an email by the end of next week on the name of the company. Please see the following link for additional guidance.
    • Week 2: Important Financial Concepts Readings: • Text: Gitman: Chapter 4: • Text: Gitman: Chapter 5: • Text: Gitman: Chapter 6: • Text: Gitman: Chapter 7: Class Activities: Read the integrative case study, "Encore International", page # 371. • Online Discussion Assignment: I will post a question related to a current topic in the discussion, than post your answers in the weekly discussion. • Weekly Discussion Topics/Question: Link to the Discussion • After you finish the case for Week 2, Please go to the “Quiz” section of the course website and take the test for this week’s case. Week 3: Long-Term Investment Decisions • Readings: • Text: Gitman: Chapter 8: • Text: Gitman: Chapter 9: • Text: Gitman: Chapter 10: Class Activities: Read the integrative case study, "Lasting Impressions Company", page # 492. • Online Discussion Assignment: I will post a question related to a current "long-term investment decision making process." • Weekly Discussion Topics/Question: Link to the Discussion • Annual Report Analysis (Due week 8): You should have received and reviewed the financial statements needed to start your Annual Report Project. • After you finish the case for Week 3, Please go to the “Quiz” section of the course website and take the test for this week’s case. Week 4: Long-Term Financial Decisions • Readings: • Text: Gitman: Chapter 11: • Text: Gitman: Chapter 12: • Text: Gitman: Chapter 13: Class Activities: Read the integrative case study, "O'Grady Apparel Company", page # 622.
    • • Online Discussion Assignment: Please search the internet for Capital Market Line and answer the question in the weekly discussion. • Weekly Discussion Topics/Question: Link to the Discussion • After you finish the case for Week 4, Please go to the “Quiz” section of the course website and take the test for this week’s case. Week 5: Short-Term Financial Decisions • Readings:  Text: Gitman: Chapter 14:  Text: Gitman: Chapter 15: Class Activities: Read the integrative case study, "Case De Diseno", page # 703. • Online Discussion Assignment: Please search the internet for Asset Allocation and answer the question in the weekly discussion. • Weekly Discussion Topics/Question: Link to the Discussion • After you finish the case for Week 5, Please go to the “Quiz” section of the course website and take the test for this week’s case. | Week 6: Derivatives and Options • Readings: o Text: Gitman: Chapter 16: Class Activities: Read the case study, "Financing L. Rashid Company's Chemical-Waste-Disposal System", page # 742. • Online Discussion Assignment: Please search the internet for Derivatives and answer the question in the weekly discussion. • Weekly Discussion Topics/Question: Link to the Discussion • After you finish the case for Week 6, Please go to the “Quiz” section of the course website and take the test for this week’s case. Week 7: Mergers, LBO's, Divestitures and Business Failures Readings: • Text: Gitman: Chapter 17: Class Activities: Read the case study, "Deciding Whether to Acquire or Liquidate Procras Corporation", page # 786.
    • • Online Discussion Assignment: Please search the internet for Business Failure Record and answer the questions in the weekly discussion. • Weekly Discussion Topics/Question: Link to the Discussion • After you finish the case for Week 7, Please go to the “Quiz” section of the course website and take the test for this weeks case. • Annual Report Project: You should at this point be prepared to submit your Annual Report Project next week. Week 8: International Managerial Finance • Readings: o Text: Gitman: Chapter 18: Class Activities: Read the integrative case study, "Organic Solutions", 829. • Online Discussion Assignment: I will post a question related to a current a current "International Finance" situation. • Weekly Discussion Topics/Question: Link to the Discussion. • After you finish the case for Week 8, Please go to the “Quiz” section of the course website and take the test for this weeks case. • Annual Report Project: Your Annual Report Project is due. Please deposit it in the dropbox. | VII: INSTRUCTOR: Dr. Shaily Verma, Ph.D. – Financial Economics Phone # 847-890-1737 sverma@cougars.ccis.edu