Topic 1. Introduction to Corporate Finance. Overview of Financial Decisions.
| Class 1.
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October 8
1 p.m. – 4.15 p.m.
Room 403
| Key points:
— Financial management: goals, primary issues, company’s value and cash flows
— Introduction to the course
— Free cash flow and company’s value
— Accounting and market-based performance results
— Capital allocation process and financial markets
Learning outcomes: Students should be able to
— Explain the main goal and primary issues of financial management
— Understand the concept of the free cash flow, relationship between company’s value and cash flows
— Calculate free cash flow
— Understand the capital allocation process and the role of financial markets
Assignments for class 2:
Reading:
E. Brigham, M. Ehrhardt. Financial Management: Theory & Practice . 14th ed. Thomson-South Western. 2014 (BE): ch. 1, 2, 5
Chapters 1 and 2 are required readings to get basic ideas of corporate finance, financial markets and instruments; repeat financial statements structure and performance measures.
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Topic 2. Interest Rates and Debt Securities. Bonds Valuation.
| Class 2.
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October 15
1 p.m. – 4.15 p.m.
Room 403
| Key points:
— Securitization and financial crisis – discussion
— Bond features, factors that impact bond prices
— Types of bonds. Pure discount bonds. Coupon bonds
— Interest rates and bond valuation. Impact of the discount rate and timing of payments on bond valuation
— Term structure of interest rates
— Bond prices and yields. Current yield and yield to maturity.
— Relationships between coupon rate, required return, and bond price
— Bond valuation and bond yields
Learning outcomes: Students should be able to
— Understand what is the process of securitization is and how it triggered the crisis
— Know main types of bonds and their characteristics
— Define bond features and how different factors could affect bond prices and yields
— Understand the term structure of interest rates and the determinants of bond yields
— Apply present value concept to valuation of bonds
— Use different models for bond yields estimation
Assignments for class 3:
Reading:
— BE: ch. 5, 7
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Topic 3. Stocks Valuation.
| Class 3.
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October 22
1 p.m. – 4.15 p.m.
Room 410
| In-class assignment: Test 1 (topics 1, 2) (45 min)
Key points:
— Factors that affect stock prices
— Stock valuation methods. Discounted dividend model.
— Adjusting the dividend discount model.
— Multiples approach to stocks valuation
Learning outcomes: Students should be able to:
— Understand how stock prices depend on future dividends and dividend growth
— Be able to value stocks using the dividend growth model
— Value stocks using the dividend growth model
— Explain and use multiples approach to stocks valuation
Assignments for class 4:
Reading:
— BE: ch. 6, 7
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Topic 4. Equity Valuation and Risk. Capital Asset Pricing Model.
| Class 4.
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October 30
1 p.m. – 4.15 p.m.
Room 209
| In-class assignment: Quiz 1 (15 min)
Key points:
— Tradeoff between risk and return
— Risk and diversification
— Risk measures
— Stand-alone and portfolio risk
— Systematic and unsystematic risk
— CAPM and security market line
— Calculating beta coefficients
— Using CAPM for equity return estimation
Learning outcomes: Students should be able to:
— Understand the concept of risk and return on investments
— Understand and calculate risk measures
— Understand the concepts of systematic and unsystematic risks
— Calculate beta coefficients
— Use CAPM for estimating expected return on equity
Assignments for class 5:
Reading:
— BE: ch. 6, 9
Group project – Part 1 (due to November 20, 8 pm)
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Topic 5. Financing Decisions and Cost of Capital.
| Class 5.
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November 8
2.45 p.m. – 6.00 p.m.
Room 403
| In-class assignment: Quiz 2 (15 min)
Key points:
— Cost of equity capital
— Cost of debt
— Weighted average cost of capital (WACC)
— Approaches to cost of capital estimation
— Factors affecting WACC
Learning outcomes: Students should be able to
— Understand the concept of WACC
— Calculate the cost of debt and equity
— Apply WACC concept to estimation of companies’ cost of capital
Assignments for class 7:
Reading:
— BE: ch. 10, 11
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| Class 6.
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November 11
9 a.m. – 12.15 p.m.
Room 403
| In-class assignment: Group assignment 1
Raising Capital Case Study ( held byCitibank top-managers)
Key points:
— The role facilitators play within the business area, the links with Sales & Trading, Investment Bank and the Capital Raising options
— Loans, bonds, equity as instruments of company’s bridge financing
— Block-trade exercise
Learning outcomes: Students should be able to
— understand how and why banks make recommendations to clients in different market situations, based around their understanding of the company and the market
In-class group assignment 1:
Based on the capital markets case discussion: make a summary on the preferences and market conditions of raising capital by large international company: loans, bonds, equity.
Preparation for group assignment 2 (class 8): IPO discussion, based on Genset IPO case.
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Topic 6. Long-term Financial Decisions: Investment Valuation.
| Class 7.
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November 19
1 p.m. – 4.15 p.m.
Room 209
| In-class assignments: Test 2 (topics 3,4,5)
Key points:
— Overview of capital budgeting decisions
— Investment decision criteria: Net present value, Internal rate of return (to be cont.)
— Multiple IRRs, MIRR, Profitability index, Payback period
— Forecasting investment projects cash flows
Learning outcomes: Students should be able to
— Apply capital budgeting concept and criteria to investment decisions
— Apply capital budgeting concept and criteria to investment decisions
— Identify and calculate cash flows relevant to investment projects
Assignments for class 8:
Reading:
— BE: ch. 3, 12
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Topic 7. Financial Statements Analysis and Corporate Valuation.
| Class 8.
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November 26
1 p.m.- 4.15 p.m.
Room 403
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In-class assignment: IPO group discussion, based on Genset case.
Key points:
— Factors that impact IPO decisions
— Estimation of IPO price range
— Standardized financial statements
— Ratio analysis
— Du Pont system
— Limitations of ratio analysis
Learning outcomes: Students should be able to
— Know how to calculate and interpret important financial ratios
— Know the determinants of a firm’s profitability and growth
Assignments for class 9:
Reading:
— BE: ch. 3, 12
Group project – Part 2 (due to December 14, 8 pm)
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Topic 7. Financial Statements Analysis and Corporate Valuation (cont.).
| Class 9.
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December 3
1 p.m.- 4.15 p.m.
Room 410
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In-class assignment: Quiz 3 (15 min)
Key points:
— Using financial statement information
— Corporate valuation model
Learning outcomes: Students should be able to
— Understand the problems and pitfalls in financial statement analysis
— Apply valuation model to valuing companies
Assignments for class 10:
Reading:
— BE: ch. 14, 15
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Topic 8. Capital Structure and Dividend Policy.
| Class 10.
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December 10
2.45 p.m. – 6.00 p.m.
Room 410
| In-class assignments: Test 3 (topics 6,7)
Key points:
— Capital structure theories and practice
— Capital structure and company’s value
— Financial leverage and financial risk
— Cash distributions and dividend policy
— Stock splits and stock dividends
Learning outcomes: Students should be able to
— Analyze company’s capital structure decisions
— Link capital structure to company’s value
— Analyze dividend policy and factors that impact dividends payments decisions
Assignments for class 11:
Preparation for the presentation of the group project.
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| Class 11.Group Project Presentations.
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| December 17
12.15 p.m.- 4.15 p.m.
Room 209
| In-class assignments:
Group project – part 3: Group presentation
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Office hours for individual consultations (also available by appointment):
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Volkhovsky per., 3, room 403, 209, 410
5 pm-6.30 pm
Осtober 8
October 15
October 22
October 30
November 6
November 12
November 19
November 26
December 3
December 9
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