Full file at
Corporate Finance: A Focused Approach, 2nd edition
Title page to be provided by South-Western College Publishers
ISBN page to be provided by South-Western College Publishers.
Full file at
CONTENTS
PREFACE
Course Format...... v
Mini Cases: Powerpoint, Excel, and “Web Safaris”...... v
Other Class Support Materials...... vii
Acknowledgments...... vii
Conclusions ...... viii
Part I. COURSE SYLLABUSix
Part II.TABLE OF CONTENTS FOR ANSWERS AND SOLUTIONS TO
END-OF-CHAPTER QUESTIONS, PROBLEMS, AND MINI CASESxiii
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PREFACE
This preface contains a description of how we use Corporate Finance (CF). Additionally, it gives some suggestions on how the instructional aids contained in this manual, the book’s web site, or available separately in printed form from South-Western College Publishers can be used to enhance the course.
Course Format
There is no single best way to teach a finance class—the optimal course structure varies with students' backgrounds, instructors' interests, the number of class contact hours, and the place of the course in the overall curriculum. Further, because these factors change over time, most of us vary our approaches from year to year. Still, it may be useful to some instructors to learn how we use CF.
We designed CF primarily for use in the introductory MBA corporate finance course, but it can also be used at the undergraduate level when the students are very good. We wrote CF because we wanted a textbook that could be covered in a single semester, but that still covered all the important corporate finance topics in depth.
CF provides a discussion of both the theories behind financial decision-making and "nuts and bolts" information about how to implement the theory. It is useful both for primary learning and as a reference book—students find the text useful in follow-up case courses as well as after graduation, when they must apply the material in a real-world setting.
We believe that a few cases are necessary to give the course a real-world flavor. Further, we like to use cases and problems that require the use of spreadsheets and Internet data, and a large set of cases are available from South-Western College Publishers. Most MBA programs require that students are familiar with spreadsheets prior to taking the finance course, but many students have only a rudimentary knowledge. Thus, the first finance course should give students the opportunity to learn more about spreadsheets, especially how they can be used to assist in financial decision-making.
Mini Cases: Powerpoint, Excel, and “Web Safaris”
Perhaps the most important pedagogic aid in FM is the relatively long "Mini Case" at the end of the problem set for each chapter. We noticed a difference in students' interest and attention on our "lecture days" as opposed to our "case days." Generally, case days were much livelier. That made us wonder if we could make our lectures more like the cases. Then, for several years, we experimented with writing up some short cases (Mini Cases) for use as a basis for our lectures. The Mini Cases covered the key elements of the chapters, and the solutions were set up in a lecture format, with more detail than our normal end-of-chapter problem solutions. Later, we created transparencies, and then PowerPoint slides, to enhance the solutions. The results were so successful that we ended up scrapping our old lecture notes and instead used the Mini Cases and PowerPoint slides for our lectures. We also have Excel worksheets that correspond to the Mini Cases. In addition to containing spreadsheet solutions to the Mini Case, the Excel worksheets allow us to do some real-time what-if analysis. We often visit relevant Web sites when we are in a networked classroom. For example, when teaching bond pricing, we begin with the PowerPoint show, which explains the basic concepts such as the relationship between bond prices and market interest rates for bonds of different maturities. We then “toggle” to the Excel worksheet and do some “what-if” analysis with a graph that shows the change in bond prices as we change the input, the market interest rate. When time permits, we use the Web links in at the textbook’s Web site to go on a “Web Safari.” For example, we go to a Web site that has current actual bond prices, and we compare the actual relationships with those that we discussed in class.
In the past editions, we have provided the PowerPoint and Excel solutions for these Mini Cases directly to students (on the Student CD-ROM and the Student section of the Web site) so that they can follow along in class. However, some instructors want to assign the Mini Cases as homework. Therefore, we no longer provide the Mini Case solutions on the Student CD-ROM or Student Web site. For those instructors who wish to provide the solutions to students for use as course notes, there are several options. First, instructors can post the files to their own password protected web sites (this is what we do). Second, instructors can e-mail the files to their students. Third, instructors can print the solutions and make them available to students. Fourth, instructors can contact the Publisher and order a custom publication containing the solutions, which can be packaged with the textbook.
The Mini Cases and solutions are contained in Part II of this manual. One final point about the Mini Cases is worth noting—they are particularly useful for new, inexperienced teachers and also for experienced teachers who are under too much time pressure to continually update their lecture notes. To illustrate, we know of situations at Florida, Tennessee, and elsewhere where new PhDs, who were under heavy pressure to complete dissertations or other research, were able to teach the introductory MBA financial management course for the first time and get quite good student evaluations with relatively little preparation. We certainly do not recommend teaching without adequate preparation, but we do believe that almost anyone can use the Mini Cases as lectures and get good classroom results without an inordinate amount of preparation time.
Since there are more than enough slides in the Powerpoint show to provide in-depth coverage of almost all topics in each chapter, we often delete some of the slides and add other slides that highlight some current event. We encourage you to modify the slides in the manner that best fits your course.
Other Class Support Materials
CF has a wide range of supporting material, which both enhance student learning and make teaching the course easier. For a complete discussion of these materials, see the preface to the text. Ancillary materials for personal use by adopters may be ordered through the local South-Western College Publishers sales representative or directly from the ThomsonLearningAcademicResourceCenter at 1-800-423-0563.
Those materials that are purchased by students from bookstores—the Study Guide and the Casebooks—can be ordered through your local bookstore. Note that a special order form is required for the “Digital Finance Case Library” version of the casebook because the instructor must choose the specific cases to be included in the book. Order forms can be obtained from the ThomsonLearningAcademicResourceCenter at 1-800-423-0563. Alternatively, you may go to the web site: .
South-Western College Publishers will provide complimentary supplements or supplement packages to those adopters qualified under our adoption policy. Please contact your sales representative to learn how you may qualify. If as an adopter or potential user you receive supplements you do not need, please return them to your sales representative.
Finally, there are numerous teaching aids on the textbook’s web site, and we encourage you to visit it at .
Acknowledgments
We would like to thank Amelia Bell and Stephanie Hodge for all their help on this edition. We also want to thank Lou Gapenski, Dana Aberwald, Susan Purcell Whitman, and Tina Goforth for their work in the past.
Conclusions
We have tried to make this Instructor's Manual as clear and error-free as possible; however, there are almost certainly some mistakes and unclear sections. Any suggestions for improving the manual would be greatly appreciated, and should be addressed to Mike Ehrhardt at the address given below.
Eugene F. BrighamMichael C. Ehrhardt
College of Business AdministrationFinance Department, SMC 424
University of FloridaUniversity of Tennessee
Gainesville, FloridaKnoxville, TN 37996-0540
January 2005
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Part I
COURSE SYLLABUS
Contents:Course Syllabus
Note:The syllabus that follows is similar to the ones we use, but the actual dates are left blank, so it can be easily modified for any term. All you have to do is (1) review the course sequence, number of cases, and number of exams, (2) make any desired changes, and then (3) fill in the matching dates for that term. (Don't forget holidays.) Notice that we take two classes to cover some chapters. For those chapters, we often illustrate spreadsheet techniques that apply to the chapter. Also, our classrooms have Internet access, and so we go on a Web Safari to look at actual data on the Internet.
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FIN 5xx
Sections A and B
Corporate Finance
Your Name
Spring 200x
TimeSection A:Tuesday 8:109:25 a.m.
Thursday 8:10 – 9:25 a.m.
Section B:Tuesday 9:40 – 10:55 a.m.
Thursday 9:40 – 10:55 a.m.
Room51 Glocker
Office424 SMC
Office HoursTA: Location and Hours TBA
Ehrhardt: Tuesday and Thursday, 1:00 p.m.2:30 p.m.
RequiredEhrhardt and Brigham, Corporate Finance: A Focused Approach, 2nd Edition (2006), South-WesternCollege Publishers.
OptionalThe Wall Street Journal. The Journal is a good way to begin a lifelong pattern of professional reading. We will be discussing significant financial events as they occur.
Study Guide. The study guide for the text contains an outline of the text chapters plus multiple choice questions and problems. Because the exams will have multiple-choice questions, the study guide is a good vehicle for exam preparation.
Technology Supplement. A short manual which briefly explains financial calculator usage and introduces spreadsheet techniques.
CalculatorA financial calculator is a necessity in this course. Make sure that your calculator has bond valuation, net present value (NPV), and internal rate of return (IRR) functions. I use the HP 10B (about $30). Calculators must be used to work the exams, so be sure to have fresh or back-up batteries. You should get your calculator and learn how to use it this week—don't wait until the first exam.
CourseThe course is intended to provide students:
Objectives
- An overview of the basic concepts and principles of corporate finance, with particular emphasis on risk, rates of return, and valuation.
- An overview of contemporary financial events as they occur.
- The opportunity to use spreadsheets in a corporate finance setting.
- The opportunity to practice written communication skills.
The course will focus on theories, concepts, and applications as opposed to institutional material, although some institutional background is required.
ExamsThere will be two midterms plus a final exam.
Midterm I: Tuesday, February XX, 7:00 - 9:00 p.m.
Midterm II: Tuesday, March XX, 7:00 - 9:00 p.m.
Final: Wednesday, April XX, 10:00 - 12:00 a.m.
Neither the midterm exams nor the final will be deliberately cumulative, although concepts developed in earlier chapters will necessarily be employed in later chapters. Formula sheets will be provided for use during exams. Normal classes will not be held on midterm exam days, but I will be available in my office to answer questions. No makeup exams will be given.
CasesTwo cases which focus on using spreadsheets to assist in financial decision-making will be assigned. Each student must submit a written report on each case. The reports should contain 3-4 typed pages of narrative, plus necessary exhibits. Students may, if they desire, collaborate on the cases, but each person must do his or her own computer work and write his or her own report. Cases are due at the beginning of the class on case day. No individual will be required to "present" the case, but all students must be prepared to respond to specific questions and to critique other students' comments.
GradesGrades will be based on the following weights:
Examinations (30 points each) 90points
Cases (5 points each) 10
100points
Class ScheduleThe following schedule gives the reading assignments. The lectures will stress the most important and/or most difficult material. No Extensions to any chapters will be assigned in this course. Of course, your comprehension of the lecture will be enhanced if you read the chapters before they are covered in class.
Class / Chapter / Topic1 / 1 / An Overview of Corporate Finance and the Financial Environment
2 / 2 / Time Value of Money
3 / 2 / Time Value of Money
4 / 3 / Financial Statements, Cash Flow, and Taxes Risk and Return
5 / 4 / Analysis of Financial StatementsRisk and Return
6 / 5 / Risk and Return
7 / 5 / Risk and Return
8 / 6 / Bonds and Their Valuation
9 / 7 / Stocks and Their Valuation
10 / 7 / Stocks and Their Valuation
11 / 1-6 / Exam Review during day, Midterm I, 7:00‑9:00 p.m.
12 / 8 / Financial Options, their Valuation, and Applications
13 / 9 / The Cost of Capital
14 / 10 / The Basics of Capital Budgeting: Evaluating Cash Flows
15 / 11 / Cash Flow Estimation and Risk Analysis
16 / 11 / Cash Flow Estimation and Risk Analysis
17 / 11 / Cash Flow Estimation and Risk Analysis
18 / Case 1: Tasty Foods Corporation (A)
19 / 12 / Financial Planning and Forecasting Financial Statements
20 / 7-11 / Exam Review during day, Midterm II, 7:00 - 9:00 p.m.
21 / 12 / Financial Planning and Forecasting Financial Statements
22 / 13 / Corporate Valuation, Value-Based Management, and Corporate Governance
23 / 14 / Capital Structure Decisions
24 / 14 / Capital Structure Decisions
25 / 15 / Distributions to Shareholders: Dividends and Repurchases
26 / 16 / Working Capital Management
27 / 17 / Multinational Financial Management
28 / Case 2: Sweet Dreams Incorporated
29 / All / Course Catch-up and Review
30 / 12-17 / Final Examination, 10:00 - 12:00 a.m.
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Part II
TABLE OF CONTENTS FOR ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS, PROBLEMS, AND MINI CASES
Chapter 1An Overview of Corporate Finance and the Financial Environment...... 1-1
Chapter 2Time Value of Money...... 2-1
Chapter 3Financial Statements, Cash Flow, and Taxes...... 3-1
Chapter 4Analysis of Financial Statements...... 4-1
Chapter 5Risk and Return...... 5-1
Chapter 6Bonds and Their Valuation...... 6-1
Chapter 7Stocks and Their Valuation...... 7-1
Chapter 8Financial Options, their Valuation, and Applications in Corporate Finance....8-1
Chapter 9The Cost of Capital...... 9-1
Chapter 10Basics of Capital Budgeting: Evaluating Cash Flows...... 10-1
Chapter 11Cash Flow Estimation and Risk Analysis...... 11-1
Chapter 12Financial Planning and Forecasting Financial Statements...... 12-1
Chapter 13Corporate Valuation, Value-Based Management, and Corporate Governance.13-1
Chapter 14Capital Structure Decisions...... 14-1
Chapter 15Distributions to Shareholders: Dividends and Repurchases...... 15-1
Chapter 16Working Capital Management...... 16-1
Chapter 17Multinational Financial Management...... 17-1
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