Azerbaijan University

School of Business

Fi 3300 Corporate Finance

Fall, 2011

Instructor: Rashad Karimov

Tel: 055 2079030

Office hours: after class or by appointment

E-mail:

1.  PREREQUISITIES

Mathematics and statistics

2. REQUIRED TEXTS AND READINGS

- R. Brealey, S. Myers, Fundamentals of Corporate Finance - 8th edition, McGraw-Hill

Supplementary readings:

- Ivo Welch, Corporate Finance (2008), Pearson Addison-Wesley

- Matthew Spiegel and Richard Stanton, Lecture notes to principles of corporate finance

(2000)

Supporting link: http://som.yale.edu/~spiegel/intro/sampread.pdf

The above are classic textbooks that everyone serious about establishing a good foundation in finance should own. It does an excellent job explaining institutional details and established theories.

Other readings and notes may be distributed in class. All powerpoint slides and lecture notes are the property of the instructor, and may be used for class review purposes only. The slides may not be copied, modified, or used in any other way, except for class review.

3.  COURSE DESCRIPTION AND OBJECTIVES

This course is designed to acquaint the student with the concepts of financial management and analysis in the general area of institutional finance. Moreover, the course also encompasses investment portfolio analysis and discusses the general principles of managing financial assets. The main objective of this course is to provide an introduction to the theory, the methods and the concerns of corporate finance.

Upon successful completion of the course, students should:

·  Know the various responsibilities of the financial managers and tackle many of the problems that these managers are expected to solve;

·  Explain the advantages and disadvantages of the most common form of business organizations and determine which forms are most suitable to different type of businesses;

·  Calculate the (net) present value of an asset and find the interest rate implied by present or future value of cash payments;

·  Have a basic information about how stocks and bonds are traded and explain the role of financial markets and institutions;

·  Construct a simple financial planning model and an efficient investment portfolio;

·  Have a basic knowledge about financial instruments and Capital Asset Pricing Model;

·  Interpret the information contained in the balance sheet, income statement and statement of cash flows.

4.  COURSE DETAILS

FIRST WEEK: Introduction to corporate finance. Forms of the business organizations. The firm and the financial manager. Financial markets and corporations

SECOND WEEK: The time value of money – Present values, Future values, Simple and Multiple cash flows, simple and compound interest rates

THIRD WEEK: Inflation and the time value of money. Effective annual interest rates. Annuity and Annuity Due. Perpetuity.

FOURTH WEEK: Financial assets and their classifications. Money market and Capital market. Types of long-term and short-term securities.

FIFTH WEEK: Fixed Income Securities (Bonds). Yield to maturities and duration.

SIXTH WEEK: Financial Planning: The basic concepts and financial planning models

SEVENTH WEEK: Financial Planning: External Financing and Growth

EIGHTH WEEK: Midterm

NINTH WEEK: Class presentations

TENTH WEEK: Class presentations

ELEVENTH WEEK: Accounting and Finance: The Balance Sheet, Income Statement and Statement of Cash Flows.

TWELFTH WEEK: Valuing bond and stock: Introduction to risk, return and opportunity cost of capital

THIRTEEN’S WEEK: The Capital Asset Pricing Model (CAPM). Estimating the CAPM inputs. An investor’s risk vs. reward tradeoff. The mean – variance efficient frontier.

FOURTEEN’S WEEK: Financial derivatives: Forwards, futures, options.

FIFTEEN’S WEEK: Review of lectures for the final exam

5.  GRADING POLICY AND EVALUATION

There are four major requirements for the course, each of which will contribute in the overall course grade in the proportions indicated:

·  Class participation and discussions (10%)

·  Homework (20%)

·  Midterm (20%)

·  Class presentation (10%)

·  Final exam (40%)

6.  LETTER GRADE POLICY

Letter grade / Total points
A+ / 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

7.  POLICY ON THE AVAILABILITY OF LECTURE NOTES

Lecture notes will be handed in advance of the class.

8.  CLASS PARTICIPATION

Class participation means contributing to the learning of your fellow students and maintaining a respectful learning environment. Asking and answering questions in class, and participating in class discussions and volunteering to solve problems in class are excellent methods of class participation.

Instructor grades student’s activities during discussions by “+” that increases the student’s grade, but negative class participation (disrupting class, being late for the class, not paying attention during a student presentation) will be noted as “-“ for the student. Grading class participation is necessarily subjective and no subdivision of the grade will be available to students.

To emphasize the importance of class participation frequency and quality of students’ contribution will make up 10% of the grade. Sessions should not be missed unless an emergency situation takes place, in which case students should notify the instructor via email before class.

9.  HOMEWORK

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.

9. MIDTERM

The midterm covers the first five lectures and will be in test forms. You will find 15 test questions in the midterm, that are divided into theory (10 questions, 1 point per each) and problems (5 questions, 2 points per each). This midterm will show your readiness to the next seminars and the final exam and will examine your knowledge at the half of the semester.

10. CLASS PRESENTATIONS

Two weeks are considered for the class presentations where each student will present about financial organizations, global financial events, financial markets and etc. Topic selection is up to students. Here presentation and research skill of the students are examined. For example, a student is presenting the last global financial crisis; he should give brief information about the history, reasons and consequences of the crisis and talk about his opinion (for example, the ways to prevent it). Or a student can present about a financial organization (bank, corporation and etc.) and he has to note the beginning forms of that organization (sole proprietorship, partnership, and corporation), main decisions of the organization during its history (capital budgeting, financing) and at last, individual opinions.

Grading is considered for 4 criteria: a) presentation format (a good and readable presentation is preferred), b) covering the requirements of the presentation (see above two examples), c) presentation speech of the student (this is for developing student’s speaking skills during presentations d) Answering the questions (answering both instructor’s and groupmates’ questions is for checking presenter’s readiness. Since 10 of whole 100 points are considered for presentation, 2.5 points will grade each criterion.

11. FINAL EXAM

There is ONE closed book final comprehensive exam for this course. This exam will cover NOT only topics from required readings, but also instructor’s notes about the topics. Hence, students MUST take the lecture notes during the classes.