SAMPLE. FIN300: Principles of Finance for the Private Sector

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1 FIN300: Principles of Finance for the Private Sector Credit Hours: Contact Hours: 3 This is a 3-credit course, offered in accelerated format. This means that 16 weeks of material is covered in 8 weeks. The exact number of hours per week that you can expect to spend on each course will vary based upon the weekly coursework, as well as your study style and preferences. You should plan to spend hours per week in each course reading material, interacting on the discussion boards, writing papers, completing projects, and doing research. Course Description and Outcomes Course Description A study of the financial aspects of businesses, including the costs of capital, fund acquisition sources, time value of money, efficient management of assets, and investment decisions. Particular emphasis is on determining the optimal capital structure between utilization of debt and equity financing. Recommended Prior Course: None Course Overview In this course, students will master the fundamental principles of finance. Various topics include financial institutions and markets that serve as intermediaries between suppliers and demanders of funds; financial statements and analysis; the importance of estimating cash flows; the time value of money used as a tool in the measurement of shareholder wealth; measurement of risk and reward or return; valuations of bonds and stocks; evaluating long-term capital projects; the cost of capital; capital structure and dividend policy. The goal of this course is to facilitate students in becoming proficient in the applications of financial techniques, tools and models using real world examples. Students will develop an understanding of how the various topics in finance are applied in corporate managerial decision-making. Course Learning Outcomes 1. Review the basic forms of business organizations. 2. Identify the key activities of the financial manager within the organization. 3. Explain why wealth maximization, rather than profit maximization is the firm s goal. 4. Review the operation of the capital market, particularly the securities exchanges and the role of the investment banker. 5. Apply the DuPont system and summary of financial ratios to perform ratio analysis of a firm. 6. Determine the ratios that can be used to assess the organization s degree of indebtedness and its ability to meet the payments associated with debt. 7. Use popular ratios to analyze a firm s liquidity and the activity of inventory, accounts receivable, accounts payable and total assets. 8. Describe some of the cautions that should be considered in performing financial ratio analysis. 9. Evaluate a firm s profitability relative to its sales, asset investment, and owners equity investment.

2 10. Describe the fundamentals of business taxation. 11. Understand the effect of depreciation and other noncash charges on the organization s cash flows. 12. Analyze a firm s cash flows and interpret the statement of cash flows. 13. Apply the concept of future value and the effects of compounding interest more often than annually. 14. Calculate the present value of a mixed stream of cash flows, an annuity, and a perpetuity, 15. Describe the procedures involved in finding interest or growth rates. 16. Describe interest rate fundamentals and the basic relationship between risk and rates of return, 17. Explain the meanings of risk and return and risk aversion. 18. Analyze the risk and return characteristics of a portfolio in terms of correlation and diversification. 19. Review the role of beta in measuring the relevant risk of both an individual security and a portfolio. 20. Explain the Capital Asset Pricing Model (CAPM) and its relationship to the security market line (SML). 21. Perform basic common stock valuation using both the zero growth and constant growth models. 22. Apply the bond valuation model and describe the impact of required return and time to maturity on bond values. 23. Explain yield to maturity, its calculation, and the procedure used to value bonds that pay interest semiannually. 24. Determine relevant operating cash inflows using the income statement format. 25. Define sunk costs, opportunity costs within the context of relevant cash flows. 26. Know the key capital expenditure motives and the steps in the capital budgeting process. 27. Calculate, interpret, and evaluate payback period. 28. Apply the Net Present Value (NPV) and internal rate of return to relevant cash flows to choose acceptable capital expenditures. 29. Recognize sensitivity and scenario analysis, decision trees, and simulation as behavioral approaches for dealing with project risk. 30. Determine the cost of long term debt using an approximation technique, and the cost of preferred stock. 31. Calculate the cost of common stock equity and convert it into the cost of retained earnings and the cost of new issues of common stock. 32. Find the weighted average cost of capital (WACC). 33. Explain how the WACC can be used with the investment opportunities schedule. 34. Recognize the role of breakeven analysis and the effect of changing costs on the breakeven point. 35. Explain the optimal capital structure using a graphic view of the firm s cost of capital structure. 36. Review the return and risk of alternative capital structures and their linkage to market value and other important capital structure considerations. 37. Understand cash dividend payment procedures and the role of dividend reinvestment plans. 38. Describe the key factors involved in formulating dividend policy. 39. Review and evaluate the three basic types of dividend policies. Participation & Attendance Prompt and consistent attendance in your online courses is essential for your success at CSU-Global Campus. Failure to verify your attendance within the first 7 days of this course may result in your withdrawal. If for some reason you would like to drop a course, please contact your advisor.

3 Online classes have deadlines, assignments, and participation requirements just like on-campus classes. Budget your time carefully and keep an open line of communication with your instructor. If you are having technical problems, problems with your assignments, or other problems that are impeding your progress, let your instructor know as soon as possible. Course Materials Textbook Information is located in the CSU-Global Booklist on the Student Portal. Course Schedule Due Dates The Academic Week at CSU-Global begins on Monday and ends the following Sunday. Discussion Boards: The original post must be completed by Thursday at 11:59 p.m. MT and Peer Responses posted by Sunday 11:59 p.m. MT. Late posts may not be awarded points. Mastery Exercises: Students may access and retake mastery exercises through the last day of class until they achieve the scores they desire. Critical Thinking Activities: Assignments are due Sunday at 11:59 p.m. MT. Week # Readings Assignments Chapters 1 & 2 in Principles of Managerial Finance Discussion Board (25) Chapter 3 in Principles of Managerial Finance Discussion Board (25) Critical Thinking (115) Chapter 4 in Principles of Managerial Finance Discussion Board (25) Chapters 5 & 8 in Principles of Managerial Finance Discussion Board (25) Mastery Exercises (20) Critical Thinking (115) Chapter 6 in Principles of Managerial Finance Discussion Board (25) Chapters 10 & 11 in Principles of Managerial Finance Discussion Board (25) Critical Thinking (120) Chapters 9 & 12 in Principles of Managerial Finance Discussion Board (25) Chapter 13 in Principles of Managerial Finance Discussion Board (25) Mastery Exercises (20)

4 Assignment Details This course includes the following assignments/projects: Week 2 Week 4 Week 6 Critical Thinking: Reader-response Paper (115 Points) Portfolio Assignment (350) Complete the critical thinking assignment, ratio analysis and interpretation. See full details on the Week 2 Assignments page. Critical Thinking: Executive Summary (115 points) Messineo LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end of year payments. As the CFO of Messineo, LLC you must prepare a report of the pertinent information in a short summary for the CEO. 1. Calculate the annual end of year loan payment amount. 2. Prepare a loan amortization schedule showing the interest and principal break down of each of the three loan payments. 3. Prepare a one page executive summary for the CEO, Linda Messineo, with the loan payment schedule explaining why the interest portion of each payment declines with the passage of time. Also, be sure to remind her that the interest portion of the loan payment is tax deductible. You should include your spreadsheet as an appendix to your executive summary to prove your figures in the loan payment schedule. Hint: Using a spreadsheet, you will start with the PMT function to calculate the annual payment. Next you will use the IPMT function to find the interest portion for each of the three years. Critical Thinking: NPV Exercise (120 points) Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20 percent cost of capital. A summary of key data about the proposed projects follows. Project PV of Inflows Initial Investment IRR A $3,050,000 $3,000,000 21% B $9,320,000 $9,000,000 25% C $1,060,000 $1,000,000 24%

5 Week 7 Week 8 D $7,350,000 $7,000,000 23% 1. Use the NPV approach to select the best group of projects. (Note that just the PV of inflows is given, you must subtract the initial investment to find the NPV.) 2. Use the IRR approach to select the best group of projects. (Note that the discount rate or the cost of capital is 20%.) 3. Which projects should the firm implement based on your analysis of both techniques and given the capital rationing amount? Write an to your boss, Andy Fast, the CFO, explaining your rationale proving the choices based on the considerations of shareholder value and the maximum investment budget. Keep in mind that you are less concerned with using the whole budget than with maximizing the total return to Galaxy satellite. Portfolio Milestone: Continue working on the Portfolio Project. Choose one of the following portfolio project choices. 1. Design your own project based on a real life situation. You will have to obtain approval from your instructor if you choose this option. The project must be regarding a presentation for a recommendation for financing or change in financing for a real company. You must include at a minimum the company s WACC, Capital structure, dividend policy if applicable, and the reason for the change in financing. Your proposal presentation will be either for the source of financing (describe the use that has already been determined) or the use of the financing (describe the source that has already been decided). If neither the source nor use has been decided, you should present alternatives that meet the company s expectations for increasing shareholder value. Write your proposal as a business report with executive summary and appendices if applicable. Or, you may prepare your project as a narrated PowerPoint presentation. See rubric for specific graded criteria. 2. Capital Budgeting Case From the given case information, calculate the firm s WACC then use the WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects with a capital rationing constraint. After you choose the project(s), recalculate the capital structure based on the assumption that the project(s) are implemented and determine if the new capital structure will signal the investors either positively, negatively, or not at all. Write a business report on your findings. Include an executive summary and appendices if applicable. Or you may prepare your project as a narrated PowerPoint presentation. See rubric for specific graded criteria. Portfolio Assignment (350 points) Complete the Portfolio Project. For project details, see the Portfolio Project Description, which can be accessed from the Week 8 Assignments page. Course Grading Grading Scale and Policies 20% Discussion Participation A

6 10% Mastery Exercises 35% Critical Thinking Activities 35% Final Portfolio Paper A B B B C C D F 59.9 or below In-Classroom Policies For information on late work and incomplete grade policies, please refer to our In-Classroom Student Policies and Guidelines or the Academic Catalog for comprehensive documentation of CSU-Global institutional policies. Academic Integrity Students must assume responsibility for maintaining honesty in all work submitted for credit and in any other work designated by the instructor of the course. Academic dishonesty includes cheating, fabrication, facilitating academic dishonesty, plagiarism, reusing /re-purposing your own work (see CSU-Global Guide to Writing and APA Requirements for percentage of repurposed work that can be used in an assignment), unauthorized possession of academic materials, and unauthorized collaboration. The CSU-Global Library provides information on how students can avoid plagiarism by understanding what it is and how to use the Library and Internet resources. Citing Sources with APA Style All students are expected to follow the CSU-Global Guide to Writing and APA Requirements when citing in APA (based on the APA Style Manual, 6th edition) for all assignments. For details on CSU-Global APA style, please review the APA resources within the CSU-Global Library under the APA Guide & Resources link. A link to this document should also be provided within most assignment descriptions on your course s Assignments page. Netiquette Respect the diversity of opinions among the instructor and classmates and engage with them in a courteous, respectful, and professional manner. All posts and classroom communication must be conducted in accordance with the student code of conduct. Think before you push the Send button. Did you say just what you meant? How will the person on the other end read the words? Maintain an environment free of harassment, stalking, threats, abuse, insults or humiliation toward the instructor and classmates. This includes, but is not limited to, demeaning written or oral comments of an ethnic, religious, age, disability, sexist (or sexual orientation), or racist nature; and the unwanted sexual advances or intimidations by , or on discussion boards and other postings within or connected to the online classroom. If you have concerns about something that has been said, please let your instructor know.