Managerial Finance
Managerial Finance
Spring 2012
(Subject to change)
Instructor: Wei Cen, Ph.D.
Class Meeting Time: TBA
Class Room: TBA
Office Hours: TBA
Office: C 404
Phone: 2603-2157
Email: weicen@sz.pku.edu.cn
l Course Description
This course is designed for economics, management and finance major students. It conveys the most important corporate finance concepts and applications with a managerial focus—students learn that corporate finance concerns management.
With an emphasis on intuition, this course will provide an intermediate level coverage of topics in the areas of the purpose of the firm, corporate governance, financial statements and analysis, capital budgeting, measurement of risk and security pricing, the cost of capital, capital structure, payout policy, merge and acquisition, and derivatives.
l Prerequisites
Students are assumed to have completed a basic course in finance in addition to introductory courses in economics, accounting and statistics.
l Course Learning Objectives
Upon completion of this course, students will be able to:
1. Explain the role of financial markets and corporate financial policy in the allocation of capital in a competitive economy.
2. Explain the fiduciary responsibilities of financial managers to shareholders and the common corporate governance mechanisms to contain the agency costs that result from the separation of ownership from control.
3. Calculate the cash flows of a project/firm from the common financial statements.
4. Develop and employ financial ratios to evaluate the financial performance of a firm in the context of its business model.
5. Develop and employ models to calculate and value net cash flows and explain the meaning of the results in the context of an investment decision.
6. Develop and employ basic statistics to measure and explain the meaning of individual asset and portfolio risk.
7. Develop and employ pricing models to calculate and explain changes in a variety of security prices, including stocks, bonds, and options.
8. Understand the different theories of capital market efficiency and their implications for asset pricing process and corporate policies.
9. Explain the factors that influence the corporate financing decisions, including capital structure decision and payout policy.
10. Use the weighted average cost of capital approach in the capital budgeting process and evaluate how a firm’s capital structure interacts with its investment strategy to maximize the value of the firm.
l Required Textbook
Ross, Westerfield, Jaffe and Jordan, Corporate Finance: Core Principles and Applications, 3rd edition, McGraw-Hill Irwin, 2011
l Grading
Your grade in this course will be determined by your performance in the following areas:
1. Homework (40%)
2. Case Analysis (20%)
3. Mid-term Exam (20%)
Note: The exam will consist of multiple-choice and calculation questions. No make-up exam will be provided for the mid-term exam.
4. Cumulative Final Exam (20%)
Note: A cumulative final exam will be administered during the final exam weekend. The exam will consist of multiple-choice and calculation questions. No make-up exam will be provided for final exam.
l Class Preparation and Participation
Students are expected to be prepared for each lecture by studying the textbook chapters as indicated below. Furthermore, you are expected to follow our regular financial news discussion and analysis in class and online to connect the theoretical concepts that we are studying to what is going on in financial markets day-to-day. Preparing all of these materials will help you to actively and effectively participate in classroom discussions. This means regular class attendance is an expectation. You will be responsible for all the preparatory materials in your problem sets, quizzes and exams.
l Case Group Assignment and Grading
I will randomly choose group members (generally 3-4) for the case analysis. Each member is expected to contribute to the final case report. Each group only needs to turn in one case report.
l Email Communication
Sometimes when it’s necessary, I will also communicate with you through emails. It is your responsibility to check your school emails regularly for the updates. Please make sure that your school email system work properly.
l Academic Integrity
As a student you are responsible for upholding academic integrity standards for this course. It is very important for you to be aware of the consequences of cheating, fabrication, facilitation, and plagiarism. For more information on the Code of Academic Integrity or the Student Honor Council, please visit:
Course Outline (Subject to revision!)
Weeks | Topics | Chapters | Notes |
Week1 | Introduction to Corporate Finance | Chapter 1 | |
Week1 | Financial Statements and Cash Flows | Chapter 2 | Case 1 |
Week2 | Financial Statements Analysis | Chapter 3 | HW1 due |
Week2 | Discounted Cash Flow Valuation | Chapter4 | |
Week3 | Bond Valuation | Chapter 5 | HW2 due |
Week3 | Stock Valuation | Chapter 6 | |
Week4 | Net Present Value | Chapter 7 | HW3 due |
Week4 | Making Capital Investment Decisions | Chapter 8 | |
Week5 | Risk Analysis, Real Options, and Capital Budgeting | Chapter 9 | HW4 due |
Week5 | Mid-term Exam | Case 1 due, Case 2 | |
Week6 | Risk and Return | Chapter 10,11 | HW5 due |
Week6 | Cost of Capital | Chapter 12 | |
Week7 | Capital Structure | Chapter 14, 15 | HW6 due |
Week7 | Payout Policy | Chapter 16 | |
Week8 | Options | Chapter 17 | HW7 due |
Week8 | Short-Term Finance and Planning | Chapter 18 | |
Week9 | Raising Capital | Chapter 19 | HW8 due |
Week9 | Review session, Q & A | Case 2 due | |
Week9 | Exam Weekend, Cumulative Final Exam |