BA385T Financial Management - Way.doc.doc


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BA385T Financial Management - Way.doc.doc

  1. 1. The University of Texas at Austin McCombs School of Business Financial Management Fall 2006 Course Information: Instructor Information: Course Number: BA 385T Instructor: William J. Way Time: MW: 12:30 - 2:00 p.m. (#02150) Office: GSB 5.176F Room: GSB 3.104 Office Hours: MW 2:00 - 6:00 p.m. or by Appt. Phone: 471-8169 E-mail: I. Introduction This course entails a study of the financial management of a business firm. The goal of the firm and its financial managers is to maximize shareholder value through a combination of investing and financing decisions. Major topics include: (a) the financial environment of the firm, (b) the time value of money, (c) bond and stock valuation, (d) risk and return, (e) capital budgeting, (f) capital structure theory, and g) advanced financial concepts. BA 385T provides a balanced coverage of the quantitative and qualitative aspects of financial management; hence, it should benefit students pursuing all business disciplines and careers. II. Goals Through a combination of readings, lectures, class discussions, case analyses, and problem assignments, students should: (a) gain an awareness of the investing and financing alternatives available to the firm, (b) develop a knowledge of cash flow valuation and analysis techniques, (c) achieve an understanding of the role of the financial manager in making decisions that maximize the value of the firm, and (d) appreciate the importance of the risk-return tradeoff, portfolio theory, and efficient capital markets to financial decision makers. III. Course Materials Required: 1. Corporate Finance (7e). Ross, Westerfield, and Jaffe. McGraw-Hill Irwin, 2005. 2. Harvard Business School Cases: 1) American Chemical Corporation and 2) Hospital Corporation of America (A) 3. A financial calculator 4. Additional readings, as assigned by the instructor Recommended: 1. Against the Gods: The Remarkable Story of Risk (1e). Bernstein. Wiley, 1996. IV. Examinations There will be one evening exam (Midterm) and a Final Exam. The Final Exam will be scheduled at the time and date specified by the University. The Midterm Exam will cover Chapters 1 – 10 The Final Exam will cover Chapters 11 – 18, 21, 22, 25, and 29 1
  2. 2. A. Examination Times - All students are responsible for attending the examinations at the scheduled times. Taking an examination at an alternate time is not possible except under extreme circumstances (as determined by the instructor). If you have a conflict with a scheduled exam, please contact me as soon as possible, and no later than two weeks prior to the exam. Students who miss an examination without prior authorization will receive a grade of zero for the exam. The Midterm exam is scheduled during the evening to facilitate its comprehensiveness and reduce time pressure on students. B. Examination Materials - Each student should bring No. 2 pencils and a financial calculator to the exam session. All other examination materials (e.g., a test booklet, formula sheet, and scratch paper) will be provided. Test booklets, formula sheets, and used scratch paper must be returned upon completion of the exam. The use of any other materials or technologies during the exam session is strictly prohibited. Personal items should be stored beneath your desk for the duration of the exam. C. Calculators - Many exam questions will require the use of a financial calculator. Calculators cannot be shared during the exam, so please ensure that your calculator is fully functional before entering the exam session. Further information regarding calculators is provided in the “Additional Policies” section of this syllabus. D. Examination Format - Exams will include a combination of question types (e.g., problems, multiple choice, short answer/essay). The exam questions will reflect a balance of quantitative and qualitative content, consistent with our coverage of the course material. E. Post-Examination Review - Individual examinations will not be returned, however, I will conduct a post-examination review during class. Students who wish to review their exams individually are encouraged to do so during my office hours or after class. Specific questions regarding an exam must be addressed in the two-week period following the posting of examination grades. Exam grades are final, except in the event of a recording error. If you feel that your posted exam grade is incorrect, please contact me in writing immediately. V. Case Analyses A “complete” case analysis is a group project that includes three components: 1) an Executive Summary, 2) a Staff Analysis, and 3) a set of Case Exhibits. Each member of the group will receive the same grade for the case analysis. A. Submission of Written Work - A completed grade sheet (available on Blackboard) is required when submitting all papers. No other cover sheet is required. • All written work is due by 3:00 p.m. on the dates indicated in the course schedule. o A time/date-stamped hardcopy of each paper must be submitted to the Finance Department office (CBA 6.222). o Papers without a time/date-stamp will automatically be deemed late. o Late papers will be penalized 3 points for each 24-hour period (or fraction thereof) beyond the deadline. 2
  3. 3. B. Case Groups - Students will form case groups of approximately four persons, with the exact number determined by the number of students enrolled in the class. Groups will be formed at your discretion on a first come, first served basis. A list of the members of each group is due via E-mail or in class by Monday, October 9. C. Grading Criteria - The primary basis for grading case assignments is content, however, professionalism in presentation is also given substantial weight. The writing skills component of the analysis considers grammar, spelling, punctuation, appropriateness, clarity, and thought. The following book is recommended for aiding in the preparation of written work: Strunk, William, Jr. and E.B. White, “The Elements of Style,” Macmillan. D. Case Guidelines - Detailed guidelines regarding the content, format, and grading rubric for the cases are posted on the Blackboard site. Additionally, a “Teaching Note” is provided to guide the qualitative and quantitative analyses required for each case. VI. Grade Computation Midterm Exam 30% Case 1 (ACC) 15% Case 2 (HCA) 15% Final Exam 40% You will receive a numeric score for each exam and case assignment. Letter grades will not be determined until the scores for all exams and assignments are averaged, as indicated above. The final letter grades will be based on a curve and assigned using the plus/minus system. In accordance with the MBA Policy Committee resolution, the overall Grade Point Average for the course will be approximately 3.30. All course grades are final, except in the instance of a recording error. No make-up or extra-credit work is available. The quality/quantity of your class attendance, participation, and preparation will be used to determine border line cases. VII. Additional Policies The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-4641 TTY or A. Attendance - You are expected to attend every class meeting. I understand that circumstances may arise that require your absence; however, these should be the exception rather than the rule. Regular attendance and class participation are essential to your understanding of the course content. Some material may be presented only during class meetings; hence, merely reading the text will not ensure sufficient exam preparation. If you must miss a class for any reason, please consult a fellow student to attain the notes and announcements for the class. Class notes may also be posted on the Blackboard site for the course. 3
  4. 4. B. Tardiness/Leaving Early - Please show respect for your classmates and instructor by arriving on time and remaining for the duration of the class session. If you must arrive late or leave early, please do so quietly and courteously to avoid disrupting the class. C. Calculators - A basic financial calculator is required for this course. A relatively inexpensive calculator ($30-$40) with exponent, root, present value, future value, IRR, and NPV functions should suffice for this and other finance courses. Popular models that meet these criteria include the HP 10B and TI BA II Plus. The HP 10B is my personal favorite, and the only one for which I can provide “technical” support. The HP 12C, while more expensive, is also popular with many finance students. Learning to use your calculator is a necessary, but insufficient ingredient for success in this course. Despite its importance, the calculator is merely a tool that facilitates the problem solving process, so do not over rely on its capabilities. I urge you to become well acquainted with your calculator long before the first exam. Tutorials that describe the basic financial functions of the HP 10B, TI BA II Plus, and HP 12C are posted on Blackboard. D. Problem Sets - I will assign recommended problems for most of the chapters of the text. These problems will not be collected or graded; however, they constitute an essential element in exam preparation. I strongly recommend that you attempt to solve the problems before consulting the solutions manual (posted on Blackboard). As you work these problems, try to understand the underlying concepts and relate them to material covered in class and in the text. Please consult me if you encounter difficulties. E. Access to Blackboard - All students must have access to the Blackboard web site for this course. I will use this venue to post class notes, assignments, announcements, and problem solutions. I will also use the E-mail feature of Blackboard to correspond with you. Check the site (and your E-mail) regularly to ensure that you have the most current course information. Web-based, password-protected class sites will be available for all accredited courses taught at The University. Syllabi, handouts, assignments and other resources are types of information that may be available within these sites. Site activities could include exchanging e-mail, engaging in class discussions and chats, and exchanging files. In addition, class e-mail rosters will be a component of the sites. Students who do not want their names included in these electronic class rosters must restrict their directory information in the Office of the Registrar, Main Building, Room 1. For information on restricting directory information see: F. Laptop Computer Policy – The use of laptop computers for the purpose of taking notes is permitted. All other non-academic uses (web surfing, etc.) are prohibited. G. Name Cards – To facilitate discussion and name recognition, each student will be supplied with a name card. Please display your name card at all times during the class session. 4
  5. 5. H. Other - All other matters of class management and conduct will be handled in accordance with published University guidelines. Please consult the General Information Catalogue or the Dean of Students’ website for additional information. VIII. Academic Integrity Academic integrity and honesty are critical to the conduct of this course. The responsibilities of both students and faculty with regard to scholastic dishonesty are described in detail in the Policy Statement on Scholastic Dishonesty for the McCombs School of Business: By teaching this course, I have agreed to observe all of the faculty responsibilities described in that document. By enrolling in this class, you have agreed to observe all of the student responsibilities described in that document. If the application of that Policy Statement to this class and its assignments is unclear in any way, it is your responsibility to ask me for clarification. Policy on Scholastic Dishonesty: Students who violate University rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course and/or dismissal from the University. Since dishonesty harms the individual, all students, and the integrity of the University, policies on scholastic dishonesty will be strictly enforced. You should refer to the Student Judicial Services website at or the General Information Catalog to access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty. Every student is expected to abide by the University Honor Code. IX. Additional Comments The aforementioned policies provide the basic guidelines and code of conduct for the course. They are designed to reduce confusion and establish an equitable framework for the entire class. As a matter of principle, I will enforce these policies fairly and religiously. The “spirit” of the course is just as important as the “rules and regulations.” My goal is to create a cooperative classroom environment in which we learn from each other. To that end, I welcome your constructive comments and suggestions as we progress through the course. Your feedback is an important element of course delivery and development. Barring an emergency, or except as previously arranged, I will be available during my office hours and after class. I encourage you to visit with me regarding the case assignments, concerns with the course, or just to say “hello.” I am also accessible via telephone or E-mail. I will make every effort to return your call or respond to your E-mail within one business day of its receipt. I welcome each of you as my colleague in the study of finance . . . Good luck in the course! 5
  6. 6. General Study Guidelines The following guidelines are presented as an addendum to the syllabus. Class Preparation: It is important that you read the assigned chapters before we discuss them in class. Class lectures and discussions are much more meaningful if everyone is conversant with the subject matter. I will discuss the major concepts from each chapter and emphasize what is most important, but I will be unable to cover everything during class. As you read the chapters, ask yourself the following questions: • What is the purpose of this concept or formula? • Why is it important? • How did the author or instructor demonstrate its application? • How does it relate to other concepts/formulae that we have studied? • Can I describe this concept or formula in my own words? • Can I answer the concept questions in the text? Problem sets - I suggest that you work the recommended problems in conjunction with your reading/review of each chapter. Practice makes perfect, so work as many extra problems as necessary to master the concepts. Initially, try to work each problem without consulting the solution set. Do not wait until the week before the exam to attempt the problems. Be prepared for class - Bring your text, calculator, and pertinent notes to each class session. Much of our class time will be devoted to discussing/reviewing example problems. Consult the tentative course schedule for weekly reading and problem set assignments. Take good class notes - Class notes for each chapter may be posted on Blackboard, but these will be “skeletal” by design. Class lectures and discussions will enhance these notes and integrate them with other essential course material. Ask questions - I encourage you to be an active learner by asking questions and participating during class discussions. Please E-mail me or see me during office hours if you have additional questions regarding the course material. Keep apprised of current financial issues - As time permits, we will discuss how the concepts in our text apply to the “real” world. Devote a little time each day to perusing the Web and/or financial publications for pertinent topical issues. Exam Preparation: The course material and the exams are cumulative by nature. The basic concepts that we cover early in the course provide the foundation for the more advanced material that we address later. Try to master the concepts as we cover the material and avoid “cramming” the week before the exam. It is extremely difficult to catch up if you get behind on the readings and problem sets. I will schedule review sessions prior to each examination, however, you should review the course material “early and often” on your own and/or in your study group. 6
  7. 7. BA 385T – Tentative Course Schedule Fall 2006 Week Day Date Assigned Reading Chapter Content 1 W Aug. 30 Introduction Overview of course 2 M Sept. 4 Labor Day Holiday W Sept. 6 Chapter 1 Introduction to Corporate Finance Martin et al. article (BB) Overview of Financial Theory Parable (BB) Where's Waldo? 3 M Sept. 11 Chapter 2 & Appendix 2A Review Financial Accounting Chapter 3 Review Financial Modeling W Sept. 13 CSR Readings (BB) Corporate Social Responsibility Maria Elena PPT: CSR and Business Ethics 4 M Sept. 18 Chapter 4 Time Value of Money and NPV W Sept. 20 Chapter 5 Stock and Bond Valuation 5 M Sept. 25 Chapter 6 Capital Budgeting Investment Rules W Sept. 27 Chapter 7 NPV and Capital Budgeting 6 M Oct. 2 Chapter 8 Real Options and Capital Budgeting W Oct. 4 Chapter 9 Overview of Capital Market Theory 7 M Oct. 9 Chapter 10 Capital Asset Pricing Model W Oct. 11 Pre-Exam Review 8 M Oct. 16 Midterm Exam (Evening) Chapters 1 through 10, CSR W Oct. 18 Chapter 11 Arbitrage Pricing Theory 9 M Oct. 23 Chapter 12 Cost of Capital and Capital Budgeting W Oct. 25 Chapter 13 Efficient Market Hypothesis 10 M Oct. 30 Chapter 14 Long-Term Financing American Chemical Case Due 7
  8. 8. BA 385T – Tentative Course Schedule Fall 2006 Week Day Date Assigned Reading Chapter Content W Nov. 1 Chapter 15 Capital Structure: Basics 11 M Nov. 6 Chapter 16 Capital Structure: Advanced W Nov. 8 Chapter 17 Valuation and Capital Budgeting 12 M Nov. 13 Chapter 18 Dividend Policy W Nov. 15 Chapter 21 Leasing 13 M Nov. 20 Chapter 22 Options: Basic Concepts Hospital Corporation Case Due W Nov. 22 Independent Study 14 M Nov. 27 Chapter 22 Options: Basic Concepts Chapter 25 Derivatives and Hedging Risk W Nov. 29 Chapter 25 Derivatives and Hedging Risk 15 M Dec. 4 Chapter 29 Mergers and Acquisitions W Dec. 6 Pre-Exam Review TBA Final Exam Chapters 11-18, 21, 22, 25, 29 8