Class Syllabus Corporate Finance

Class Syllabus Corporate Finance


FINA 4332 – Fall 2004

Professor: Dr. Martin Dierker

Office: Melcher Hall 210C


Phone: 743 4777


Times and Room:

Section 0515: Mon, Wed 10:00-11:30, MH 112

Section 0517: Mon, Wed 11:30-1:00, MH 118

Office hours: Mon, Wed 1-2pm and by appointment

Prerequisites: FINA 3332, ECON 2304, and DISC 3331 are required by the college – the computer may drop you from the course if you do not fulfill these requirements.

Resources: Ross, Westerfield, and Jaffe, “Corporate Finance”, 6th edition. Solutions for this book are available. You will need a calculator – either a simple one or a financial calculator. Absolutely no laptops or sharing of calculators in exams.

Contact the professor for further in-depth readings on a topic.

Scope of Class: An alternative title for this class would be “How to get rich by making smart investments” – The first part of class studies what projects to undertake, the second part how to finance those projects. We conclude by studying some special topics in corporate finance such as dividend policies and mergers and acquisitions.

Modern finance is particularly successful in studying problems of the energy sector. We will go beyond the Net Present Value concept to study how oil fields and power plants are run.

Grading: This will be an exciting and challenging class. The material is demanding. I try to give everyone a good grade. However, I am unable to do so if you show no effort!

The final grade breaks down as follows:

1st Midterm 33.3%

2nd Midterm33.3%


Class Participation13.3%

Exams are closed-book. You will be allowed to bring one 8.5 by 11 inch page, on which you may write formulas (both-sided), but no definitions or statements. You should also bring your non-programmable calculator. Both items will be checked during the exam, as well as your ID. Makeup exams will only be allowed for urgent medical reasons (bring doctor’s certificate) or rare extraordinary circumstances (you have to contact me in advance, and I reserve the right to deny permission).

There will be one case study which gives us the opportunity to apply the material to a typical real-world situation. It will be a highlight of the course. You can work in teams of up to six people. You will have to do a short (!) write-up including a spreadsheet. We will then discuss the case in class. This means you will have to present your answers to the posed questions to the class. Both written and oral presentations will be graded. Besides finding the correct answer, the style of presentation is important!

Some “mini-cases” may be assigned and treated as homework.

Class participation includes regular attendance, assigned reading and homework problems, and actively taking a stake in this class. This class is not a one-way road. You have to do your share in making the most of our time together.

If you feel this class is progressing too fast, and you have trouble following even though you prepared diligently, it will be your responsibility to slow down the pace by raising questions.

Further issues:

Students with disabilities: Please contact both me and the Center for Students with Disabilities at (713) 743 5400 for assistance. We care about you!

Academic Honesty: By enrolling in this class, you agree to abide by the standards of academic honesty as outlined by the university. Any violation will be taken extremely serious. You may face an “F” in the course and could be expelled!

For details, refer to the academic honesty policy at

Tentative Class Schedule:

The schedule below is tentative and may change based on the speed of progress in class.

This is why no exact dates are given for the chapters. Students are responsible to always stay one chapter ahead with their readings.


8/23-10/11IntroductionCh. 1

Accounting and Finance: From earnings to cash flowsCh. 2

The Capital Budgeting Decision:

Time value of money and the NPV ruleCh. 4

How to value stocks and bondsCh. 5

Alternative investment rules and the optimality of NPVCh. 6

Applying NPV to the capital budgeting decisionCh. 7

Corporate Strategy – how is value created?Ch. 8

Risk-return tradeoff and the CAPMCh. 9, 10

How to find the cost of capitalCh 12

10/13 First Midterm

10/18 Exam discussion

10/20-11/29The Capital Structure Decision:

The Efficient Market Hypothesis Ch. 13

Capital structure: Debt vs. equity financingCh. 15

Debt and Taxes: The two certainties of corporate lifeCh. 16

The weighted average cost of capital (WACC)Ch. 17

Adjusted Present ValueCh. 17

Topics of Special Interest:

Handing back cash: Dividends and repurchases Ch. 18

Raising new cash and Initial Public Offerings (IPOs)Ch. 19

Mergers and Acquisitions – when do they create value?Ch. 30

11/10 or 11Case due

same weekCase presentation in class

12/1 Second Midterm

This schedule is tentative. Only chapters that have been covered in class are relevant for the tests.