PEPPERDINE UNIVERSITY THE GEORGE L. GRAZIADIO SCHOOL OF BUSINESS AND MANAGEMENT

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1 PEPPERDINE UNIVERSITY THE GEORGE L. GRAZIADIO SCHOOL OF BUSINESS AND MANAGEMENT Managerial finance (FINC 655) Dr. Michael D. Kinsman SYLLABUS Dr. Michael Kinsman Page 1 of 8 FINC 655

2 THE GEORGE L. GRAZIADIO SCHOOL OF BUSINESS AND MANAGEMENT 6100 CENTER DRIVE LOS ANGELES, CALIFORNIA MICHAEL D. KINSMAN, CPA, PH.D. PROFESSOR OF ACCOUNTING AND FINANCE -- (949) Attached is your syllabus for Summer, I am looking forward to working with you to ensure that we have the best possible class in finance, which will allow you to use this material in your business life. This letter shares two requirements for the class not listed in the syllabus. You will need: A financial calculator capable of doing internal rates of return: Any calculator that does present and future value, including Internal Rate of Return, is acceptable. If you are going to purchase a new calculator, I suggest that you purchase one of first four (I do not have a financial interest in HP!): 1) An HP-10BII calculator, which costs around $40, is also a good choice. If you have an iphone or and ipod Touch, strongly consider the version of this calculator available at the itunes store called "10BII Calc Financial Calculator." The icon is blue and yellow. For $4.99, you get all of the same look and feel of the HP-10BII plus many very useful add on features. This is a real buy. 2) The HP-12c financial calculator (about $90), is the "old standby" in the finance industry. 3) I have not used, but have instructions for, the TI BA-II calculator on my website. If you have this calculator, it should work. If you do not have it, please consider buying one of those listed above. 4) I have posted additional calculator sheets for the HP17 and HP19 calculators, in case you have them. I have a handout that shows the keystrokes for doing financial problems with each of these calculators. To get a preview of this, check my website at I will not show them for other calculators--though if you already have a calculator and know how to use it, that will not be a detriment to you. I will not be able to help you learn to use other calculators (because I don't know them). Please come to each class with your calculator. If you have an old financial calculator at your house that is not one of the ones listed above and you don't know how to use it, please buy a new one--you will use this calculator a lot and the price of a slow start is high. Buy the calculator at the place it is cheapest. Places you might try are Office Depot; Adrays; and Best Buy. Also search the web for good buys. Web access. I will use "the Web" as a vehicle for transferring information to you. You should receive an from me before the start of the trimester if your address is listed with Pepperdine. If you have not gotten an from me, please me to let me know you are part of the class. You will need Adobe Acrobat Reader and will want to download the notes each week. Those are listed in the pull down menu on the syllabus website. Dr. Michael Kinsman Page 2 of 8 FINC 655

3 Managerial Finance MBFE 655 Summer, 2010 Dr. Michael Kinsman OCC faculty office 438 Wednesday, 6-10 pm (949) OCC Room 400 Syllabus Prerequisite: MBFE 652 or equivalent. No exceptions. Course description (from the catalog) and objectives: Students learn to define, comprehend, and apply a market-driven theory for ethically based, strategic financial decisions. Important issues include the return and risk of the activity in which to invest, the size of the investment, and the sources for financing the investment. Each decision is part of the overall financial strategy that adds value to the shareholder. Topics include: financial markets, financial reporting, the cost of capital, portfolio analysis, capital structure, dividend policy, options, cash management, and international monetary issues. Texts Brigham, Eugene F. and Ehrhardt, Michael C., Financial Management: Theory and Practice, (12th ed., Mason, OH.: South-Western Publishers), Listed below as BR. Optional extra book: Study Guide for this text. Please prepare the readings and materials listed below each session for that session. Many students have told me that the optional study guide assignments have been useful to them. These assignments will not be collected. PREPARE, listed below, means that at a minimum you should read the case and prepare the questions listed, usually with numbers and exhibits. PREPARE does not mean write for turn in, although I may, on occasion, choose to collect your notes. There are many issues that the questions listed for the cases do not address. We will address these issues in our discussion of the cases. Please feel free to bring up uncovered issues in class. You will be assumed prepared unless you tell me otherwise. It is very important that you be prepared for each session--important to you and to our learning team. While I realize that the cases are difficult, it is the doing and the trying that are important. Doing a case wrong is more valuable to your learning than not doing it at all. Previous groups have told me that working in groups of three to five in preparing the cases was very helpful--in fact, many of those students have told me that they would require such groups, although at the start of class they would have resisted such an assignment. I do not plan to assign such groups. but I strongly urge you to get into a study group for these cases. However, if you are not participating in your group, or are the only one participating in your group, you are in the wrong group. If I were studying for the class, I would do the reading first and then would prepare the cases. While I have attempted to match the cases to the reading, in some instances the readings may precede the cases by several sessions. Before each session, and probably before you begin reading, you will want to download and review the notes for that session. The download locations may be reached from the web version of this syllabus in the pull down menu in the top frame. You may be interested in checking out my "Useful Finance and Accounting Websites" data page located at < As you do your project, I believe you will find this a good source of information. Dr. Michael Kinsman Page 3 of 8 FINC 655

4 Grading and attendance: attendance issues. Please see the last page of this syllabus regarding grading and Conduct: The Graziadio School of Business and Management has asked me to direct your attention to pages 204 to 213 of the catalog, regarding conduct expected of a graduate student and of an employee of the University. Policy on disabilities: The Graziadio School of Business and Management has asked me to direct your attention to page 37 of the catalog, regarding assistance for students with disabilities. Session I--May 5--Introduction to the course Get: Download handout notes for session 1 Download Johnʼs Really Terrible Day case for session 1 Read: BR, pp (ch. 1) BR, pp (ch. 3) BR, pp (ch. 4) BR, pp (ch. 14) Introduction to the course Introduction to finance Calculation and use of financial ratios Financial planning and budgeting Sources and uses of funds Planning and forecasting Prepare: Johnʼs Really Terrible Day 1. This is a nice overview of the processes you should have discussed in accounting. Session II--May 12--Interest, valuation and risk Get: Download handout notes for session 2 Download Billʼs Hardware Store case for session 2 Read: BR, pp (ch. 2) BR, pp (ch. 6) BR, pp (ch. 7) (Donʼt panic. We will discuss this!) How does compound interest work? What are investments worth? Project risk Prepare: Billʼs Hardware Store Dr. Michael Kinsman Page 4 of 8 FINC 655

5 Session III--May 19--Valuation, risk, rate of return, cost of capital Get: Download handout notes for session 3 Read: BR, pp (ch. 5) BR, pp (ch. 8) BR, pp (ch. 10) BR, pp (ch. 15) Risk and its effects on firm decisions The capital asset pricing model The Gordon model Cost of capital Capital budgeting--round 1 Prepare: Case to be handed out in class at week 2 Session IV--May 26--Capital budgeting Get: Download handout notes for session 4 Download Taco Frio case for session 4 Read: BR, pp (ch. 9) BR, pp (ch. 11) BR, pp (ch. 12) BR, pp (ch. 13) Project cash flows Risk and capital budgeting Inflation and its effect on capital budgeting Cash budgets Real options Prepare: Taco Frio Pick up the OM Scott Case for Week VI Pick up the midterm examination tonight Session V--June 2-- First midterm examination There will be a take home midterm examination handed out at Session IV due back to me as discussed in class. No class tonight. Dr. Michael Kinsman Page 5 of 8 FINC 655

6 Session VI--June 9--Leverage, dividends and internal financing Get: Download handout notes for session 6 Read: BR, pp (ch. 16) BR, pp (ch. 17) BR, pp (ch. 18) What is leverage? What does leverage do for a firm? How does leverage affect risk? Dividends and their effect on firm value Retention Prepare: OM Scott and Sons Assignment: The class project will be discussed in detail tonight Session VII--June 16--Working capital management, inventory control, liquidity, multinational finance Get: Download handout notes for session 7 Download Carrefour SA case for session 8 Read: BR, pp (ch. 22) BR, pp (ch. 26) Working capital Inventories Liquidity Short term financing Operating in foreign countries Prepare: Carrefour, SA Session VIII--June 23--Long term securities, common stock and derivative securities Get: Download handout notes for session 8 Read: BR, pp (ch. 21) BR, pp (ch. 23) BR, pp (ch. 25) Long term securities Common stock Debt Preferred stocks Dr. Michael Kinsman Page 6 of 8 FINC 655

7 Session IX--June 30--Leasing and convertibles Get: Download handout notes for session 9 Read: BR, pp (ch. 19) BR, pp (ch. 20) BR, pp (ch. 24) Warrants Mergers Convertibles Leasing Options Bankruptcy Session X--July 7--Second midterm examination In class examination covering sessions VI through X. approximately two and one-half hours in length. This examination will be Session XI--July 14--Class project reports (round 1) Get: Download handout notes for examination 2 return In this class session, we will discuss investment vehicles for investors. In addition, we will have class reports by about half the class on their class projects. Turn in by the time class is scheduled to begin: Each of you will turn in your term project (whether or not you are presenting tonight). An analysis of a public company other than the company where you now work. This evaluation shall cover all financial and business factors that may cause it to be mis-priced on the stock market. I expect you to do a fundamental (i.e., business) analysis, including but not limited to rates and cost of capital. I expect you to contact the company and to use public sources of information to do this report Session XII--July 21--Class project reports (round 2) The second half of the class reports will be done in class at this session. Session XIII--July 28--Catch up and review session Catch up and review session. An opportunity for reflection on what we have learned. Session XIV--August 4--Final examination In class examination covering the entire class. This examination will be approximately two and one-half hours in length. Dr. Michael Kinsman Page 7 of 8 FINC 655

8 How will my grade be computed? Your grade will be based in the main on your total points on two examinations plus a class project: Examination I (take home) will be approximately 25 percent of the total points available in the class. Examination II (in class) will be approximately 25 percent of the total points available in the class. The final examination (in class) will be approximately 25 percent of the total points available in the class. The class project, oral and written, will be 25 percent of the total points in the class. The oral portion will be 10 percent and the written 15 percent of the total class points. The actual percentages of points on each examination may vary from 20 to 30 percent (as opposed to the 25 percent listed above) of the total points, depending on the length of the examination and the type of questions on it. In addition, you must turn in all collected homework in order to pass the class. If you miss four classes, you will lose one letter grade in the class. For each additional class you miss, you will lose one additional letter grade. I reserve the right to raise or lower grades based on class participation as follows: If you are one of the one or two most outstanding people in the class in terms of participation and have turned in all your homework on a timely basis, I reserve the right to raise your grade to the next higher sign (for example, from B+ to A-). If you have generally not participated in the class (or that participation has been a negative participation), I reserve the right to lower your grade to the next lower sign (for example, from A- to B+). This procedure will not affect many of you--probably two at most in any class. Dr. Michael Kinsman Page 8 of 8 FINC 655