COMM370: CORPORATE FINANCE

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1 COURSE GOALS The course aims to familiarize students with working knowledge of key corporate finance decisions that are important in the life of a corporation and, more generally, to help students acquire an understanding of broad economic issues that are of wide applicability in many areas of corporate finance. LEARNING OBJECTIVES While the main goal of the course is to familiarize students with the fundamental concepts in corporate finance, we will also emphasize these concepts practical applications. This will be done through case studies, problem sets, and real-world examples. At the end of the course, students will be able to: Implement financial statement analysis and planning Estimate a project s cash flows and cost of capital Evaluate capital structure policy Understand how debt financing affects capital budgeting Evaluate payout policy Describe how a company can arrange long-term financing Understand the key issues in mergers and acquisitions ASSESSMENT SUMMARY Your grade will be determined as follows: Midterm Exam 40% Final Exam 60% The evaluation weights listed above are non-negotiable. In order to pass the course, the student must achieve a minimum of 50% on the final exam and achieve a weighted average on the combined midterm and final of at least 50%. PROGRAM GOALS B.COM Critical Thinking Analytical Decision-making Oral & Written Communication Ethics & Sustainability - 1 -

2 COURSE INFORMATION Division: Finance Term/period: Fall 2011, Term 1 Instructor: Dr. Kai Li Teaching Assistant: kai.li@sauder.ubc.ca Phone: Phone: Office hours: Mon 3-4pm; Tue 2-4pm Office hours: Section number: 103, 104, 106 Class meeting times: Course duration: Sept 7 Nov 30, 2011 Classroom location: Pre-requisites: COMM298 Tutorials / labs: Course website: BRIEF COURSE DESCRIPTION The purpose of this course is to provide working knowledge of key corporate finance decisions that are important in the life of a corporation and, more generally, to help students acquire an understanding of broad economic issues that are of wide applicability in many areas of corporate finance. The course balances rigorous theoretical content and practical applications. You will gain experience in applying empirical and theoretical tools through the class discussion of two cases, as well as through your work on ungraded practice problems. Topics covered in the course include financial statement analysis and planning, capital structure policy, capital budgeting, the treatment of debt financing in capital budgeting, dividend policy, how corporations arrange long-term financing, and mergers and acquisitions. COURSE MATERIALS & REQUIREMENTS Lecture Notes Self-contained lecture notes will be posted on the course Vista website before each lecture. The lecture notes are the most important study material. You should print and bring the notes with you to the lectures. Textbook Corporate Finance, 2011 (6 th Edition) by Ross, Westerfield, Jaffe and Roberts (RWJR), is strongly recommended, which covers course topics in more detail. Practice problems will be assigned from this book. Alternatively, Fundamentals of Corporate Finance, 2010 (7 th Edition) by Ross, Westerfield, Jordan and Roberts (FCF), which does not have the same in depth coverage as the RWJR text book

3 Cases The two cases can be purchased online from Harvard Business School Publishing at: Other Learning Resources The textbook is available at the bookstore for purchase. There are also four copies of the book on reserve in the David Lam Library, so you can make copies of the indicated chapters and return the book to the library as soon as possible. Any additional readings or materials are available from Vista. ASSESSMENT There will be a midterm exam worth 40% of your grade and a final exam worth 60% of your grade. The evaluation weights listed above are non-negotiable and both exams will be closed book. You are required to take both exams in order to obtain a passing grade. The final exam is cumulative, but weighted more towards the material in the second half of the term. In order to pass the course, the student must achieve a minimum of 50% on the final exam and achieve a weighted average on the combined midterm and final of at least 50%. Please see the section POLICIES & PROCEDURES for additional important information. The COMM 370 midterm exam has been scheduled for??? at 18:00 in???

4 SCHEDULE please check vista for update Lectures Date Topics Readings Lecture 1 Sept 7 Introduction to COMM 370 Course Outline and Brief Review Lecture 2 Sept 12 Financial Statement Analysis and Cash Flow Ch 2 (incl 2.A, 2.B) Ch 31.A, Ch Lecture 3 Sept 14 Financial Planning and Growth Ch 3 Lecture 4 Sept 19 Short-Term Financing and Financial Planning Ch , Ch 3 Lecture 5 Sept 21 The Clarkson Lumber Case Lecture 6 Sept 26 Cash Flows in Capital Budgeting 1 Ch (incl 8.A, 8.B) Lecture 7 Sept 28 Cash Flows in Capital Budgeting 2 Ch (incl 8.A, 8.B) Lecture 8 Oct 3 Cost of Capital in Capital Budgeting Ch Lecture 9 Oct 5 Long-Term Financing: An Introduction Ch , 15.5 Oct 10 Thanksgiving Classes are cancelled Lecture 10 Oct 12 Midterm Review Oct 17 Midterm Exam Classes are cancelled Midterm Exam Lecture 11 Oct 19 Capital Structure Theories: Modigliani-Miller I&II Ch Lecture 12 Oct 24 Introduction to Financial Distress and Bankruptcy Ch Lecture 13 Oct 26 Cost of Debt Ch , Lecture 14 Oct 31 The Massey Ferguson Case Lecture 15 Nov 2 Capital Budgeting with Debt 1 Ch Lecture 16 Nov 7 Capital Budgeting with Debt 2 Ch Lecture 17 Nov 9 Payout Policy Ch Lecture 18 Nov 14 Long-term Financing I: IPO Ch Lecture 19 Nov 16 Long-term Financing II: Debt Ch Lecture 20 Nov 21 Long-term Financing III: Leasing Ch , 22.8 Lecture 21 Nov 23 Mergers and Acquisitions 1 Ch Lecture 22 Nov 28 Mergers and Acquisitions 2 Ch Lecture 23 Nov 30 Final Review TEACHING & LEARNING ACTIVITIES The lecture notes available from Vista are the most important reference material you need to carefully digest to do well in this course. You should print and bring the lecture notes to class. These notes may contain blank spaces which you are responsible for completing in class. The textbook provides a good discussion of most topics covered in class, many practical examples, and practice questions. It should be used together with the detailed lecture notes provided. The practice problems are not graded but are essential for your understanding of the material. The solutions will be posted on Vista. These problems are good guidance for what you can expect in the exams. I encourage you to solve the practice problems on your own or in a small study group (even better)

5 The two case studies are required readings. To make the best out of these cases, you should read them carefully before they are discussed in class and be ready to summarize them and express your views. I may provide additional readings or supplementary material that I will make available on Vista. Attend the lectures and come well-prepared to participate in class. Classes are more dynamic and interesting when students express their views. Please feel free to ask questions or contribute to our discussions at any time. I would also appreciate feedback about how to improve the course. I suggest you prepare a printed name card and you place it in front of you during each lecture. This will help me learn your names and will facilitate our communication in class. Regularly visit the course website on Vista and check for important announcements. RECOMMENDED SUPPLEMENTAL READINGS Barbarians at the Gate by Bryan Burrough and John Helyar Confessions of a Wall Street Analyst by Dan Reingold Den of Thieves by James B. Stewart Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald Liar's Poker by Michael Lewis Monkey Business by John Rolfe and Peter Troob On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M. Paulson The Big Short by Michael Lewis The Great Crash by John Kenneth Galbraith The House of Morgan by Ron Chernow The Partnership: The Making of Goldman Sachs by Charles D. Ellis The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the Junk Raiders by Connie Bruck Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves by Andrew Ross Sorkin - 5 -

6 POLICIES & PROCEDURES 1. If for any reason you miss an exam, you must contact the Undergraduate Office immediately and provide them with the documentation necessary to justify your absence. 2. Any student who misses the midterm will have all of the weight from that exam transferred to the final exam (provided the Undergraduate Office confirms that the absence was justified). 3. If you know in advance that you are unable to write the midterm exam on the scheduled date or time due to a valid reason (e.g., a UBC course conflict), you must the course instructor at least TWO weeks before the scheduled midterm exam and provide all necessary documentation. 4. Only midterm exams written in INK will be eligible to be re-read. You may, of course, choose to write an exam in pencil but, in doing so, you will release your right to request a re-read. 5. If you wish to have your midterm exam re-read, you must submit your detailed request in writing within five business days of the date the midterm exams were returned in class. If a request is made, all questions on the exam may be re-evaluated and a new higher or lower grade may be assigned. 6. Students must attend ONLY their registered section of COMM 370. Since the sections of the course are full, attending at an alternative time will deprive another student of their seat. 7. Note that different instructors teach different sections of COMM370 and that exams are NOT COMMON to all sections of the course. Hence, you must attend classes with your designated instructor. 8. Please arrive to the classroom at the designated time to avoid disturbing the class after it has begun. 9. Do not use your cell phones or send/view text messages during class. For emergency situations, please excuse yourself from the classroom. 10. The responsible use of laptops is allowed only for class purposes, like taking notes or as directed by the instructor, but not for checking or surfing the web during class time. 11. Students are encouraged to ask questions and make comments during the lecture. Comments should be addressed to the whole class and private discussion among students should be avoided. 12. Only basic scientific (non-graphing) calculators are allowed during the exams