UNIVERSITY OF MASSACHUSETTS BOSTON COLLEGE OF MANAGEMENT AF Theory of Finance SYLLABUS Spring 2013

Transcription

1 UNIVERSITY OF MASSACHUSETTS BOSTON COLLEGE OF MANAGEMENT AF Theory of Finance SYLLABUS Spring 2013 Meeting time: Section 01 (1380) Mondays and Wednesdays, 4.00pm 5.15pm Room: McCormack Instructor: Office hours: Dr. Mine Ertugrul Mondays and Wednesdays pm and by appointment Office: McCormack Building, 5 th Floor, Room Phone: Course Prerequisites: Completion of AF301 is required to take this course. COURSE DESCRIPTION: This is an advanced corporate finance course designed to cover a broad range of issues faced by corporate finance managers. The course focuses on Investment decision of the firm: What assets should the firm invest in to create value? How do we measure the risk of these investments? Financing decision of the firm and capital structure: How should the firm finance its assets? Debt vs. Equity? Firm s payout policy: Dividends and other payouts LEARNING OBJECTIVES: 1. To provide corporate finance background for developing critical thinking skills. For a successful financial manager, understanding the subject is the first step to develop financial strategic thinking skills. The course will cover the following corporate finance subjects: Review the time value of money concept and learn the techniques to value stocks and bonds. Develop the skills to evaluate projects that create value for shareholders (capital budgeting). Explain the risk-return tradeoff and the Capital Asset Pricing Model (CAPM). Understand and analyze the financing (capital structure) decisions related to value creation in a corporation. 1

2 2. To enhance teamwork skills. Ability to work with others will have an important contribution to a successful career as a manager. To contribute to your teamwork skills in this class, two cases will be assigned to the groups of four. 3. To sharpen written communication skills. Case assignments require each group to submit written analysis with each case. These assignments are opportunities for you to sharpen your written communication skills. COURSE FORMAT: This is a lecture course. The material will be presented mostly during lectures. I will also post additional material on Blackboard. The homework assignments will also help you learn the material. Cases will help you apply the concepts you learn in the class. COURSE MATERIALS: Required Text: 1. Ross, Westerfield, and Jordan, Fundamentals of Corporate Finance, McGraw Hill/Irwin, 10th Edition. There is a custom edition of this book available at the bookstore with CONNECT. Custom edition is cheaper than the hardcover book ($162.50). Custom edition also includes the cases. You can also purchase an earlier edition of the textbook. The material does not change much, but the chapter numbers might be different. When you buy a previous addition, you need to purchase CONNECT account separately, which costs $50. Alternatively, you can purchase CONNECT Plus, which gives you access to CONNECT and an e-book for 6 months. CONNECT Plus costs $ CONNECT account for the book (If you have purchased the textbook from the bookstore, you should have the CONNECT account. If you have not purchased the textbook from the bookstore, go to the CONNECT site below. The instructions for registration are posted on the CONNECT links below (under Need Help Registering? )) CONNECT has a free trial option that allows you to register without purchasing an access code and get full access for 21 days. This option is helpful if you are waiting for financial aid, or the textbook in the store, or if you drop the class during add/drop period. You can also use this free trial option to try CONNECT Plus ebook before you purchase it. Connect Access: 2

3 Please bookmark your section s webpage. At this webpage you will access your assignments and practice questions. For technical problems related to CONNECT please contact McGraw-Hill Customer Support: 3. Cases: You will be asked to do two case studies. Cases are included in the custom textbook. Case 1: Ocean Carriers Harvard Business School: Case 2: Pioneer Petroleum Harvard Business School: Calculator: You must have a financial calculator to get through the course. Many of the exam and homework problems involve complex arithmetic and financial calculations and a financial calculator is necessary to solve them. Any financial calculator with cash flow function is acceptable. If you don t have one, I will recommend you to buy Texas Instruments BA II Plus (you don t need the professional version) for ease and economy. Blackboard: Syllabus, lecture notes and other class materials will be posted on Blackboard page. I highly encourage you to check Blackboard before you come to class for important postings. Please do not me through Blackboard. Please me at Make sure that your Blackboard is forwarded to the account you frequently use. Follow the link below for instructions. For technical problems related to Blackboard, please contact UMB Tech Support: ATTENDANCE: Class will start on time. You are responsible for all information and announcements covered in class. If you are late or unable to attend class, it is your responsibility to obtain missed information from other students. The information in this syllabus may be modified as the course progresses. Make sure to check Blackboard. If you will come to class late or leave the class early, you should let me know beforehand. I expect you to be respectful to others in the classroom. Any behavior that disturbs other students will not be tolerated. Cell phones, pagers, or beepers are not allowed in class. CLASS PREPARATION: You are responsible for reading all assigned material BEFORE it is covered in class. Even if the content is not clear, prior exposure will familiarize you with the terminology and allow you to 3

4 focus on understanding the concepts discussed during class. I will be more than happy to help you when you have questions. You can stop by my office during the office hours or make an appointment. The best way to reach me is through . HOMEWORK, PRACTICE QUESTIONS, AND CASES: Homework: I will assign homework regularly during the semester. You will need a CONNECT account to access and submit your assignment. You should have a login for CONNECT within one week of the start of the semester. I will only accept assignments through CONNECT. Timely submission of assignments is very important. The answers to questions will be available on CONNECT site soon after the due date/time. Therefore, you will not be able to submit assignments after its due date. I will drop the assignment with the lowest grade when calculating your average. There will be no make-up assignments. CONNECT works best with Internet Explorer and Firefox. On CONNECT you will have the option to re-take your assignment three times before the deadline. If you do that and have three different scores, I will record the highest score of the three as your final assignment grade. Assignment Due Dates (The assignments are due at PM on the due date. Any changes to the due dates will be announced in class. Please refer to the syllabus and CONNECT webpage for assignment due dates. I will not announce the due dates in class unless there is a change): 1. Ch.1 & 2 Feb. 7 (Thursday) 2. Ch.6 Feb. 21 (Thursday) 3. Ch.7 - Feb. 28 (Thursday) 4. Ch.8 March 7 (Thursday) 5. Ch. 9 March 14 (Thursday) 6. Ch. 10 April 4 (Thursday) 7. Ch.12 & 13 April 18 (Thursday) 8. Ch. 14 & 15 May 2 (Thursday) (No assignment on Ch. 16, but practice questions will be posted) Practice Questions: I will post practice questions for each chapter on CONNECT. I will solve some of these questions in class. CONNECT will provide the solutions for these questions. Some of the assignment questions will be similar to the practice questions. Cases: I will assign two cases that you will work on in groups. You will have case questions to work on. The cases will be on capital budgeting (Ocean Carriers) and cost of capital (Pioneer Petroleum). I will give the details and case questions later in the term. I will try to help you as much as I can with the cases. You can send me a list of questions about the case and I will answer them as much as I can. I will also share the questions and answers with the other students by posting them on Blackboard. But I will not correct your cases before you hand them in (i.e., I cannot point out your mistakes if you send me a spreadsheet). Timely submissions of the cases are very important. I will not accept any late case submissions. 4

5 You should form your group of four people (maximum) for the case by Feb. 22. If you have fewer than four people in a group, me and I will try to combine the groups. I do not allow across-group collaboration in case studies; I will consider it cheating. I also expect you to maintain the highest standards of ethical conduct. Any plagiarism attempt will be severely penalized. EXAMS AND GRADES: 15% Assignments 20% Cases (10% each) 30% Midterm 35% Final Exam Makeup exams, for well documented medical reasons (the doctor s note should say you should be excused from the exam because of sickness), will be composed of essays and problems. There will be no extra credit assignments. Requests for reconsideration of grading of exams must be submitted within a week from receiving feedback on the exam. The written request must explain why the specific question should be reevaluated (i.e., provide your explanation of what you included on the exam) and should be stapled to the exam. Tests will consist of conceptual material and problems. The content for exams will focus on class lecture/discussion, the problems we solve in class, and assigned homework. Inputs used in any calculation must be provided on the exam to receive credit. Partial credit will be given for correct procedures even if an error is made early in the problem. The process is graded; therefore, providing only the correct answer will be worth very little credit. You will be given a formula sheet for each exam. I will post the formula sheet on Blackboard before the exam, so that you know ahead of time which formulas you will get with the exam. COURSE FEEDBACK: Your feedback is very important. Therefore I will give short surveys during the semester. This will give you an opportunity to express what you like or don t like about the course anonymously. I will try to address your concerns as much as I can during the semester. STUDENT BEHAVIOR: As a student taking coursework in this College, you have an obligation to maintain the highest standards of ethical conduct. You are expected to follow regulations and procedures regarding Academic Standards, Cheating, Plagiarism, and the Documentation of Written Work (http://www.umb.edu/administration/student_affairs/dean/judicial/csc.html). Students caught cheating or plagiarizing will, at the discretion of the instructor, flunk either the assignment in question or the course and will have a description of the incident attached to his or her academic records. 5

6 The reason for requiring the highest standards of ethical conduct is to ensure fairness, honesty and integrity in the evaluation of student performance. Evaluation of student performance should not be invalidated by students intending or attempting to misrepresent the skill, achievement or ability of either themselves or others. Disabilities: If you have a disability and feel you will need accommodations in order to complete course requirements, please contact the Ross Center for Disability Services (M-1-401) at (617) For more information see: Three things to do to get ready for this class: 1. Sign up for CONNECT and bookmark the access page for your section. 2. Forward your Blackboard to the account you frequently use, by following the instructions provided in the link below: 3. Start forming your case group and me the names by Feb

7 COURSE SCHEDULE AF 325 Spring 2013 This schedule is tentative and subject to change. Any variations will be announced in class. Week 1 (Jan 28, 30) Syllabus (discussion) Ch.1: Introduction to Corporate Finance Ch.2: Financial Statements, Taxes, and Cash Flow Week 2 (Feb 4, 6) Week 3 (Feb 11, 13) Week 4 (Feb 18, 20) Week 5 (Feb 25, 27) Week 6 (Mar 4, 6) Week 7 (Mar 11, 13) Week 8 (Mar 18, 20) Week 9 (Mar 25, 27) Week 10 (Apr 1, 3) Week 11 (Apr 8, 10) Week 12 (Apr 15, 17) Ch.5: Introduction to Valuation: The Time Value of Money (self-reading) Ch.6: Discounted Cash Flow Valuation (Review of time value of money) Ch.6: Discounted Cash Flow Valuation Ch.7: Interest Rates and Bond Valuation Feb 18 President s day No class Ch.7: Interest Rates and Bond Valuation Ch.8: Stock Valuation Class feedback survey Ch.9: Net Present Value and Other Investment Criteria Ch.10: Making Capital Investment Decisions Spring break Review for Midterm Midterm Exam (March 27) Ch.12: Some Lessons from Capital Market History Ch.13: Return, Risk, and the Security Market Line Ch.13: Return, Risk, and the Security Market Line Ch.14: Cost of Capital April 15 Patriot s Day No class Ch.14: Cost of Capital Week 13 (Apr 22, 24) Case Discussion Ocean Carriers (Case study is due) April 22 Ch.15: Raising Capital Week 14 (Apr 29, May 1) Week 15 (May 6, 8) Week 16 (May 13, 15) Ch.15: Raising Capital Ch.16: Financial Leverage and Capital Structure Policy Ch.16: Financial Leverage and Capital Structure Policy Case Discussion- Pioneer Petroleum (Case study is due) May 8 Review FINAL EXAM (As scheduled by the university May 20-24) no exceptions 7