Finance 4050 – Fall 2001

Capital Investment Analysis

Course Description:

Course description as published in the catalog: “Focuses on capital budgeting and investment issues. Emphasizes issues relating to cash flows, capital rationing, the investment versus financing decision, leasing, fluctuating rates of output, investment timing, capital budgeting under uncertainty, and investment decisions with additional information

The course focuses on how to use valuation tools, techniques and theory to determine the value of any capital asset.

Prerequisites: FNCE 3010 and 3020. You should not attempt this course if you have not completed FNCE 3010.

Required and Optional Materials:

Required:

  • Damodaran, Aswath. Investment Valuation, John Wiley & Sons, Inc., 1996.

You should visit the author’s web site as soon as possible. You will find useful materials (data sets, spreadsheets, and other valuation materials). The URL for the site is: The author will post (in September) the revised version of the text.

  • Financial Calculator: Bring to all class meetings.
  • Excel skills. You need basic spreadsheet skills and the willingness (and time) to develop superior skills by building financial spreadsheet models.

Optional:

  • Intermediate Corporate Finance Text: (The following have been used for our FNCE 3010 course and are acceptable.) Brigham, Gapenski and Ehrhardt, Financial Management, 9th Edition, The Dryden Press, 1999. Ross, Westerfield and Jaffe, (4th or 5th Edition) McGraw Hill—Irwin, 1999.
  • Wall Street Journal, student subscriptions are available.

College Policy Statement: The College of Business has designated the CU e-mail account as the "official" account for College communications with undergraduate students. That is, undergraduate students must register for a CU e-mail account and are responsible for any communication from the College and professors that is sent to this account. If you have yet to register for a CU e-mail account, you may do so by going to the College of Business Home page at: and clicking on the "Plus (Email Link)".

Course Materials.

All course materials (handouts, lecture notes and other materials) will be stored on the College of Business web site. You may access this with the following URL:

Grading:

Your grade will be based on three exams, graded homework, class participation and a term paper (analysis and valuation of a publicly traded corporation). The following shows the courses points assigned to each

Notes about the tests:

  • Make up examinations will not be given. An alternative time will be arranged if you have a valid reason for missing an examination.
  • You will be allowed one page of notes for each examination.
  • You should plan on using your financial calculator to answer examination problems.
  • Each exam will consist of take home and in class questions.

Homework: We may have as many as 30 different graded homework exercises.

Class participation: Ten points will be based on attendance and forty points will be based on meaningful class participation. Participation points will be assigned by Rush’s subjective assessment of both the quality and quantity of the student’s contribution to class discussion. The quiet person will receive 0 points and the very active person (asking and answering questions) will receive 40 points. The median participation point score has been 20 for past classes.

Term paper:

  • You will be valuing a public corporation.
  • You may make this a group effort or an individual effort.
  • This is a group project with 3 as the maximum group size. If your group is larger than 3, pick two companies in the same industry and work as two groups that share information and work.
  • You need to form your group as soon as possible and identify the company that will be valued. Submit your selection to Rush. We will not have two groups valuing the same company.
  • A peer evaluation procedure will be used and will influence the grade assigned to each group member.
  • Dysfunctional groups. (Getting rid of a group member or getting out of a bad group.)
  • Two out three group members may vote the third member off the paper. The person that is forced to leave the island may continue to use the original company, but survivors are under no obligation to share information with the cast off.
  • An individual may elect to split from the group. The person that elects to leave may continue to use the original company. The exiting member is under no obligation to share information with other group members.
  • This must take place on or before Monday, October 1st.
  • The final version of the paper is due Friday, December 7th.

Tests: We will have three tests (two hour exams and a comprehensive final examination). Your test points will be computed by taking the average of the best two of three test scores times 600 points. Tests will be mainly problems with a few multiple-choice descriptive questions. We may have one or more take home questions.

COURSE WEB SITE

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