STERN SCHOOL OF BUSINESS
NEW YORK UNIVERSITY
UNDERGRADUATE COLLEGE
Fall 2000
C15.0007.001 Financial Management Professor Rita Maldonado-Bear
MW 11:00AM – 12:15PM Office: Tisch Hall 9-03
Room: KMEC 5-80 Office Hrs. MW 2:00 – 4:00 PM & M 6:10 – 7:10
Phone: 998-0360
SYLLABUS
BOOKSREQUIRED: Eugene F. Brigham, (1) Fundamentals of Financial Management, Dryden Press, (Eighth Edition, 1998).
RECOMMENDED: Study Guide to the text, number (1) above. This supplement outlines the key sections of the text, provides self-test questions for each chapter, and presents a set of problems and solutions similar to those in the text.
PC DISKETTEYou will need one.
HAND
CALCULATORA financial calculator is strongly recommended. If you are buying one, make sure it has net present value (NPV) and internal rate of return (IRR) functions. The bond valuation function would also be nice to have, especially if you are a finance major. My personal choice (partly because it follows most texts computational instructions) is the Hewlett Packard 19B II “Business Consultant”.
PROFESSIONAL
BEHAVIOR Regular on time class attendance as well as following professional business behavior, courtesy and etiquette is required and will be taken into account in the overall grade
COURSE
OBJECTIVESThis course is designed to familiarize you with the fundamental concepts and principles underlying the financial management decisions of the firm. Emphasis will be given to (1) evaluating corporate performance via financial statement analysis and forecasting and (2) the decision to acquire real assets; i.e., capital budgeting. Briefer introductions will be given to (3) financing the firm; i.e., capital structure, cost of capital and financing vehicles, (4) portfolio analysis and security valuation and (5) working capital management. The latter three topics are more fully developed in semester-length courses of their own. However, one of the project cases will help you to understand the cost of capital computation and the estimation of the price of a security (a share of stock).
The course is application oriented, and through assigned cases and problems you will apply some of these fundamental concepts and principles to the planning and decision-making process of financial management.
PROJECTS/CASES
AND
PROBLEMSThe class will be divided into groups of three to five students. Each group is required to prepare and submit a report on each of the three projects/cases assigned. These reports are due at the beginning of the class in which the case is to be discussed as indicated in the course outline. Reports that are handed in one minute after the class starts will be penalized 10 points. Additional minutes of lateness will be penalized at the rate of one additional point off, per each additional minute of lateness. Specific instructions will be provided in class for each project/case.
In addition to the three projects/cases, there are assigned problems. These are indicated in the Course Outline. Although none of the problems are required and will not be collected or graded, it is recommended that these are worked out by the student in order to best understand the reading material assigned and be prepared for class discussion and tests. This is particularly true for the problems that appear in shadow print in the class outline. Students may work with their group to solve all the problems. Some of these problems will be discussed in class or you may discuss them with the class TA during his office hours. Some of these problems will be part of the mid term and final exam.
EXAMS AND
GRADINGThere will be one mid term and a final examination. The course grade will be based on:
three project/cases30%
midterm & final20% & 40% (higher % to the higher score)
class participation10%
Following departmental guidelines, and also reflecting historical incidence, the grade distribution will be approximately:
A 05%C+ &
A-10%C &
B +10%C- &20 to 25%
B & D , F, IP & IF hopefully none
B-40 to 50%
OFFICEOffice 9-03, Suite 9-190, Tisch Hall (212) 998-0360
Tisch Hall, 40 W 4th St., NYC
OFFICE HOURS
MondaysWednesdays
2:00 - 4:002:00 - 4:00
6:10 - 7:10
and by appointment
PROFESSOR’S
WEBSITETo enter site first enter the Stern site, then faculty, then finance department, then Maldonado-Bear’s page. At the end of the page, there is a website icon, click on it. Finally, to get into my website you need: 1) User name: student; 2) Password: success. Enjoy!
GETTING TO
KNOW YOUIn order to know you better I would appreciate your providing me with the following:
FIRST, fill out the sheet distributed in class, please enter all the information requested and in the back of the sheet information about yourself that will help reveal your individuality (i.e., you are a ballerina, a marathon runner, a piano player in a nightclub band, would like to be president of the US. or of NYU, etc.)
SECOND, two small photos of you, that will fit in my classroom map (no larger than 1” x 1.5”). You can cut out your face from a group photo, or make a photocopy of your student ID. Please, print your name on back of each photo and clip both photos on the student information sheet, before you hand in the m in.
THANKS FOR YOUR COOPERATION!
COURSE OUTLINE
Date/Ses.TOPIC AND ASSIGNMENTS
9/61 and
9/112 I.INTRODUCTION
A. Scope of the course. Project/Cases and their importance.
B. The Internal/External Environment of the Firm Including Ethical Issues
Ch. 1 & Ch. 2
Problem (P) St-1 Self Test Problem p. 27
Recommended (R): Bear and Maldonado-Bear, Free Markets, Finance, Ethics and Law, (Prentice Hall, 1994) Chapter One, "A Framework for Ethical Decision Making", PP.1-56.
R: Ibid, pp. 202 - 204 on the Agency Theory in Corporate Finance and legal ramifications and pp. 186-189 on Legal Agency and the Fiduciary Relationship.
9/13 3 and
9/184C. Financial Markets and institutions. Interest Rates.
Ch. 4
Problem (P) 4-12 p. 149
Integrative Case (p.151).
Home work to be handed in: Plot a yield curve using current yields on US Treasury Securities as quoted in the Wall Street Journal. Hint: see problem (P) 4-13 (p.150) State what theories explain the particular yield curve that you graphed.
II.FINANCIAL ANALYSIS AND FORECASTING
9/205A. Evaluating the firm's strengths and weaknesses via:
Ratio analysis
Statement of Cash Flows
Ch. 2 (a review of accounting) and
Ch. 3 analysis of financial statements
Begin working in Project/case: “FINANCIAL ANALYSIS OF THE PUBLICLLY TRADED FIRM OF YOUR CHOICE”
9/256B. Ratios and Statement of Cash Flows Revisited
Ch. 3 review
Problem 3-13. Working this problem by hand will help you to prepare for the midterm. You may also want to add to the solution the Altman's Z score test. To compute the Z score, you may utilize the last two pages of the Multiple Discriminant Analysis write up included to be hander out in class.
Continue working in “Financial Analysis of the …” Project/Case every week until due date.
9/277C. Financial Forecasting
Ch. 15
P 15-4 (p.604)
Continue working in “Financial Analysis of the …” Project/Case every week until due date.
III.FUNDAMENTAL CONCEPTS AND VALUATION
TOOLS
10/28 andA. Time Value of Money Ch. 6
10/49Problems 6 - 32 - 6 - 37 (pp. 245 - 246) and 6 - 42, 6 - 43 & 6 - 45 (p. 247)
10/910 B. Portfolio Management: Measuring Risk via Mean Variance Approach and
Review Financial Analysis in the context of your case preparation.
Ch. 5 pages 155-174 and Appendix 5-A (in pp. 199-203)
10/11111rst PROJECT/CASE DISCUSSION (written paper due at beginning of class) “ FINANCIAL ANALYSIS OF THE PUBLICLY TRADED COMPANY OF YOUR CHOICE”
10/1612C. Portfolio Management: Measuring Risk via The Capital Asset Pricing Model Approach
"THE CAMP""THE SML"
"THE BETA""EFFICIENT MARKETS", et.al.
Ch. 5 Pages 174-203
P 5-A-1 (p.202) and P 5-A-2 (p.203)
10/1813E. Bond Valuation
Ch. 7 and skim Appendix A and B
Problems 7-6, 7-7, 7-8, 7-11, 7-14 and 7-15 (p. 289-290)
10/2314F. Stock Valuation and close Bond Valuation
Ch. 8
Self test problems 2, 3 and 4 (p. 342)
Problems 8-6, 8-7, 8-8 and 8-12 (p. 343)
Begin to prepare the second project/case: “Stock Valuation and Cost of Capital for The Publicly Traded Company of Your Choice “
10/2515G. Stock Valuation Continues
Continue to prepare the second project/case: “Cost of Capital and Stock Valuation of the Company of Your Choice”
10/3016MIDTERM
IV. THE INVESTMENT IN REAL ASSET DECISION
OR CAPITAL BUDGETING
11/117A. Cost of Capital
Ch. 9
Questions 9-2
Ps. 9-3, 9-5, 9-6, 9-9 & 9-11 (pp. 378- 381)
Continue to prepare the second project/case
11/618B. Capital Budgeting Under Perfect Certainty
Ch. 10
P 10-1 through 10-7, 10-10, 10-12 & 10-15 (pp. 415-417)
Continue to prepare the second project/case
11/819C. Cash Flow Estimation and Other Topics
Ch. 11 pages 423-433 & appendix 11-A
Self test problems 2 & 3 (p.442)
Problems 11-6, 11-10 & 11-11 (pp. 443-444)
Continue to prepare the second project/case
11/1320D. Cash Flow and Other Topics
Ch. 11 pages 433-447
11/15212nd PROJECT/CASE DISCUSSION (written paper due at beginning of class) “Stock Valuation and Cost of Capital of The Publicly Traded Firm Of Your Choice”
Begin working on third project/case; This case consists of solving capital budgeting problems 11-10 and 11-11 in p. 444 of your text. Make sure that you present your solution in the standard project case solution format, which includes an executive summary at the beginning of the project/case.
V. FINANCING THE FIRM
11/2022A. Capital Structure
Ch. 13 & Appendix 13 A
Questions 13-1 - 13-13 (p. 526)
Self Test Problems 1 & 2 (p. 527)
Problems 13-3 & 13-7 (p. 528)
Continue working on third project/case.
11/2223B. Dividend Policy and closure of Capital Structure
Ch. 14
P. 14-9 (p. 577)
Continue working on third project/case.
VI. SUMMING UPTHE THREE MAJOR DESCISION
11/2724The Optimal Capital Budget: Integration of Risk, Capital Structure (Including
Dividends) and Capital Budgeting
Pages 474-479 in Chapter 13
11/29253rd Project/CaseDISCUSSION (due at the beginning of the class)
VII. WORKING CAPITAL MANAGEMENT
12/426 A. Managing Short Term Assets
Ch. 16
Self Test Problem (p. 648) & problem 16-10, p. 651.
12/626B. Review Working Capital, The Cash Budget & Financing Short Term Assets
Ch. 17
Self Test Problem 1, p. 685.
12/1128 SUMMARY OF THE COURSE & REVIEW FOR FINAL EXAM
Final Exam: Monday December 18, 2000 (10:00 to 11:50)