Azerbaijan University
School of Business
FI 4300 Advanced Corporate Finance
Fall 2012
Assistant Professor: Leyla Yusifzada
AZ 1102, Baku, R.Safarov 17
Telephone: 0505790960
E: mail:
1. Course General Description
This course develops a framework for analyzing corporate investment and financial decisions facing financial managers and introduces students to the tools to make such decisions. Students are introduced to the central issues in capital structure and dividend policy decisions and the interaction between financing and investment decisions. Techniques are introduced for evaluating strategic investments in technology, mergers and acquisitions, corporate restructurings and research and development. They also form the basis for the valuation of firms in traditional and new-technology industries and security offerings such as initial public offerings. A variety of pedagogical vehicles are used including problem solving, case studies, lectures, and projects.
2. Credit hours: 3.0 credits
3. Course Pre-requisites: FI 4000 Fundamentals of Valuation
4. Required Computer Skills Prerequisites: Microsoft Windows, Microsoft Office (Word, Excel and Power Point 2003)
5. Books:
· Essentials of Managerial Finance, Besley & Brigham, 14th Ed; South-Western; ISBN: 10.0.324.65216.X
· Essentials of Investments, Bodie−Kane−Marcus, 8th Edition (2009) McGraw-Hill; ISBN: 978-0073382401
· Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition (2005), Pearsson; ISBN 978-0321223531
Additional Readings:
The Wall Street Journal and other financial periodicals
6. Important dates for course:
Month / Date / Course DescriptionSeptember / 17 / Classes start
October / 8 / Homework 1 due
October / 15 / Brief project statement due
October / 29 / Homework 2 due
November / 12 / Homework 3 due
November / 19 / Mid-term test
November / 26 / Homework 4 due
December / 10 / Project due
December / 24 / Homework 5 due
January / 14 / Final test*
Note: * Final test date and time will be determined by Dean Office and the provided date will possibly change.
7. Instruction Evaluation
· You are required to complete an Instructor Evaluation Form for this course (you may also choose not to complete the evaluation, but you must indicate so.)
· If you need to discuss grade-related issues after the final exam/test, please contact me only after AU has published your course grades (timing when the evaluation is still in the progress).
8. Grading Policy and Evaluation
Quizzes / 20 pointsProject / 20 points
Mid-term exam / 20 points
Final exam / 30 points
Attendance
Course total: / 10 points
100 points
9. Letter Grade Policy
Letter grade / Total pointsA+ / 97-100
A / 93-96.9
A- / 90-92.9
B+ / 87-89.9
B / 83-86.9
B- / 80-82.9
C+ / 77-79.9
C / 73-76.9
C- / 70-72.9
D / 60-69.9
F / Below 60
10. Exams (mid-term and final):
The tests will be based on the assigned readings as well as the contented presented by me and discussed with students during classes. If need for review sessions before both of exams is identified, I will organize a half class session to review the material involving students. In general, review questions help students to clarify issues that they could not completely clarify during classes or own their own.
11. Method of Instruction:
Various method of teaching will be employed to encourage proactive involvement of students and make learning process successful. Mostly employed methods and techniques to expect are discussions, lectures and problem-solving. I also expect student to actively ask questions and discuss the class materials with their other student colleagues.
12. Project:
Project is to be completed by each student to demonstrate his or her competency in solving real life problem and presenting its findings in the class. Every student is expected to submit his or her own project based on real-life issues. I am always available to discuss the topic that student chooses for his or her class project. It is important that students approach me before brief project statement is due.
I expect students to present their own work and students will be penalized for copying other’s works without properly citing them.
13. Home works:
Instructor will assign five home-works, each of which must be completed independently by students. Students are encouraged to form group discussions to analyze home-works but are expected to honestly turn in their individual home-work. Home-works are expected to be turned in as hard copies, no faxes and emails are accepted.
14. In-class quizzes:
There will be six in-class quizzes to grade the level of student’s preparedness to the classes. Students who receive low grades for quizzes will be considered as students who does not follow class material as well as do homework.
15. E-mail:
Students can contact me for arranging meetings and asking urgent questions by e-mail. But I encourage them to contact me in person to discuss substantive matters such as a class absence, exams, or grade assignments.
16. Office hours:
My office hours are Saturday at 12:00 – 1:00 P.M. .
17. Policy on Class Attendance
1. Students are expected to attend all scheduled classes and take all tests. I will also grade attendance to ensure the discipline in the class.
2. If the student misses a class, the student is still responsible for catching up on the material covered in the absence of that student before coming to the next class session. Therefore, it is responsibility of the student to arrange with student colleagues to obtain notes if he or she misses a class or classes.
3. Excessive absence: Four or more classes. Depending on the circumstances, the instructor may initiate some kind of penalty with dean’s office.
18. Policy on Make-Ups
· Mid-term and final: do not miss them. There are no exceptions for those.
· Home-works are due on the dates announced and late submission means no grade for that home-work.
· Requests for make-ups may be granted only under exceptional circumstances.
· Avoid requests for reasons of personal convenience;
· Any make-up exams, if granted, must be taken prior to the next meeting of the class.
· If you miss a test without prior notice or arrangement, no grade (zero grades) is automatically assigned to the missed test.
19. Class discipline
1. Please arrive on time to the class. Being late to class without a reason is no respect to the instructor and student colleagues as it interprets the session.
2. Do not eat food in class: please use lounge or other related areas.
3. Cell phones, e-mails, and any possible other electronic devices must be turned OFF while in class and during the test.
4. Students are expected to talk about class topics and no other topics are expected to be discussed.
20. Academic dishonesty
Azerbaijan University has no tolerance for acts of academic dishonesty. The responsibilities of both students and faculty with regard to academic dishonesty are defined by education policy of Azerbaijan University. By teaching this course, I have agreed to observe the entire 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. Academic dishonesty in this course includes copying or collaborating during an exam, discussing or divulging the contents of an exam with another student who will take the test, and use of homework solutions from another students.
COURSE DETAILS
It is expected that the students will learn techniques that will help them to analyze corporate finance decisions. The content of the course material will help students to gain knowledge and practical experience in cash flow estimation, bond and equity valuation, capital structuring, dividend payout policy, mergers and acquisitions and alternative finance.
Specific objectives of the course:
My course is designed to help students to gain knowledge and skills upon successful graduation:
1. Introduction To Advanced Corporate Finance
o Corporate Finance and the Financial Manager
o Forms of Business Organization
o The Goal of Financial Management
o The Agency Problem and Control of the Corporation
o Financial Markets and the Corporation
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 1, “An overview of managerial finance”
2. Forecasting future cash flows
o Analysis of Financial Statements
o Cash flow estimation
o Free cash flow and types of free cash flows: free cash flow to firm and free cash flow to equity
o Free cash flow calculation methods
o Forecasting free cash flow
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 2 “Analysis of financial statements”, Chapter 9, “Capital Budgeting techniques”, Chapter 10, “Project cash flows and risk”
3. Valuation of Future Cash Flows
o To learn about time value of money and its application in project evaluation
o Different types of interest rates: annuity, perpetuity.
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 4, “Time value of money”,
4. Application of time value of money techniques on bond valuation
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 6, “Bonds (Debt) – characteristics and valuation”
Essentials of Investments, Kane−Marcus, 8th Edition (2009) McGraw-Hill, Chapter 10 “Bond prices and Yields”, Chapter 11 “Managing Bond Portfolios”
5. Application time value of money techniques on equity valuation
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 7, “Sotcks (Equity) – characteristics and valuation”
Essentials of Investments, Kane−Marcus, , 8th Edition (2009) McGraw-Hill, Chapter 13, “Equity valuation”
6. Return and Risk I
o Risk and return measures
o Systematic and Unsystematic risk
o Capital asset pricing model (CAPM);
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 8,”Risk and rates of return”
Essentials of Investments,Kane−Marcus, 8th Edition (2009) McGraw-Hill, Chapter 5, “Risk and return: past and prologue”
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Chapter 6, “Market equilibrium: CAPM and APT”
7. Cost of capital:
o cost of equity,
o cost of debt ;
o weighted cost of capital
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 11,”The cost of capital”
8. Capital structure I
o Capital structure irrelevance in ideal world, Modigliani-Miller theorem I and II,
o Capital structure problem in the world with taxes , extension of Modigliani-Miller theorem I and II
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 12, “Capital structure”
9. Capital structure II
o Capital structure problem in the world with bankruptcy costs
o Capital structure problem in the world with information asymmetry.
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 12,
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Chapter 12, “Information Assymmetry and Agency Theory”, Chapter 15, “Capital structure”
10. Dividend payout policy I
o Payment methods to shareholders: dividends and share repurchases
o Dividend irrelevance in Modigliani-Miller world;
Reading:
Essentials of Managerial Finance, Besley & Brigham, 14th Ed. Chapter 13, “Dividend payout”
11. Dividend payout policy II
o Dividend payout policy in the world with asymmetric information and market segmentation
Reading:
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Chapter 16, “Dividend Policy”
12. Mergers, acquisition and restructurings I
o Introduction and definitions
o Motivation for mergers and acquisitions and valuation
Reading
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Chapter 18, “ Acquisitions, Divestitures, Restructuring and Corporate Finance”
13. Mergers, acquisition and restructurings II
o Defense mechanisms against acquisitions
o Financing mergers and acquisitions: cash or stock
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Reading
Chapter 18, “External Investment Decisions”
14. Alternative financing
Reading
Financial theory and Corporate policy, Copeland, Weston, Shastri, 4th edition, Chapter 18, “ External Investment Decisions”
15. Course Review
1