Semester 2, 2014 FINC- 303 Financial Management COURSE OUTLINE
Contents Paper Description and Aims... 1 Learning Outcomes... 1 Teaching Staff... 2 Course Delivery and Course Policies... 2 Expectations and Workload... 5 Course Materials and Course Resources... 5 Assessment... 6 Class Representatives... 6 Dishonest Practice and Plagiarism... 7 Concerns about the Course... 7 Paper Description and Aims This course is designed to develop your facility with the tools of financial analysis and the skills for making sound financial decisions. The course is based on case analysis and is intended to increase your understanding of finance principles studied in FINC 201/ACFI201 and FINC 202. For the most part, cases are based on a situation that an actual firm has faced in the past, and your task is to analyze the situation and recommend a value-creating course of action that could be taken by the managers of the firm under consideration. Assigned tasks consist of both group and individual work, and provide the opportunity to improve your written and oral communications skills. Learning Outcomes Upon successful completion of this paper, you should be able to (i) apply financial knowledge in a business context (ii) have the ability to critically evaluate arguments and draw conclusions supported by appropriate evidence (iii) demonstrate an understanding of how organizations create value through the integrated production and distribution of goods, services and information (iv) have effective written communication skills (v) deliver an effective oral presentation on an actual business case (vi) demonstrate an ability to find, evaluate and use information effectively and (vii) comprehend and use appropriate quantitative concepts and methods to interpret and critically evaluate data. Teaching Staff Paper Coordinator Name: Gurmeet Singh Bhabra Office: Commerce 5.38 Email: gurmeet.bhabra@otago.ac.nz Office Hours: Wednesday 1:00pm 3:00pm and Thursday2:00pm -3:00pm 1
You should contact the Paper Coordinator with any administrative enquiries about the paper, e.g. tutorial changes or requests for late submission of assignments. Course Delivery Lectures: First seven weeks of formal lectures based on the suggested text book. Tutorials: Students will present case analysis followed by class discussion after week 7. Everyone is expected to prepare for and attend all classes to gain full benefit from the course. If you are unable to attend a lecture you are expected to catch up on missed material. Unless stated otherwise, all aspects of the course are examinable. Weeks 28-34 Lecture Time: Tuesday and Thursday 10:00 11:50am Room: Tuesday QUAD2 and Thursday QUAD4 Weeks 36-41 Stream-1 (Morning) Tuesday and Thursday, 10:00 am 11:50am Room: Tuesday QUAD2 and Thursday QUAD4 Stream-2 (Afternoon) Tuesday and Thursday, 12:00 pm 1:50pm Room: Tuesday and Thursday ARCH2 Course Topics: Cases used in the course attempt to broadly cover the following topics: Financial analysis and forecasting Estimating the cost of capital Capital budgeting and resource allocation Management of corporate capital structure Analysis of financing/capital structure Valuing the enterprise (mergers, acquisitions, restructurings) Setting corporate financial policy Course Structure and Classroom Procedure This course consists of two parts. In the first part, basic finance principles and techniques are reviewed. In the second part of the course, cases are used, requiring a higher level of analysis and business judgment. Discussion of cases is led by you and your fellow class members. Since finance principles and techniques are not covered in detail in the prescribed case textbook, you should have a standard corporate finance text available in order to prepare assigned cases effectively. Each member of the class assumes a 2
responsibility for preparing each case and for contributing ideas to the case discussion. To be effective, you must think the problem through to a decision, be able to explain your analysis to classmates, and then defend your position. Typically, there is no one right answer to a case. In many ways, the process by which answers are sought is as important as the answers themselves. Students are required to work in groups for the assigned cases. Working on cases in groups improves the quality of analysis, develops interpersonal and time management skills, and illustrates the benefits of dividing work so that each group member contributes in the areas where that person has a relative advantage. Course Policies and General Information 1. Class participation. Class participation will count for 5% of the overall course grade. 2. Final examination. A three-hour final examination will be given during the university s final examination period. The final examination will count for 65% of the overall course grade. 3. In order to pass this course, it is necessary that a passing grade be earned on the final examination. If a passing grade is not earned, I may at my discretion, award a mark of 50 for the course regardless of what internal assessment marks have been earned prior to the final examination. Otherwise, a fail grade will be awarded for the course. 5. Group case written report and presentation. The class will be formed into groups (5 per group approximately depending on the final enrolment) by the lecturer early in the semester. Each group will be assigned a case. Each group will then prepare a written report on the case and also make an indepth presentation of the case in the classroom on the assigned date. Every member in the group has to contribute towards the presentation and every presenter will be graded individually on the presentation (only the group case report will be graded as a group). The presentation is worth 10% of the overall grade. The Department has computer equipment (laptop computers and display projectors) that may be used in preparing and presenting cases. See the department secretary to borrow this equipment. The group case written report should be no more than ten pages in length (doublespaced, 12-point font) plus any exhibits. The group report will be graded by the course lecturer for both form and content. The instructor reserves the right not to 3
mark parts of the report that exceed the stated page limit. The case report will be worth 20% of the overall course grade. Submission: Written case reports are due for submission on the day of the presentation. 6. Unless prior approval for late submission has been given, grades for work that is handed in late will be marked down. 7. All dates and details included in the course outline and syllabus are subject to final confirmation by the course coordinator. Class Schedule Class Date Topic/Case 1 8 th July Estimating Hurdle Rates for Firms & Projects 2 10 th July Estimating Hurdle Rates [Continued] 3 15 th July Estimating Earnings and Cash Flows 4 17 th July Investment Decision Rules 5 22 nd July Investment Analysis: Inflation & Exchange Rate Risk 6 24 th July Investment Analysis: Project Interactions, Side Benefits and Side Costs 7 29 th July Financing Mix: Tradeoffs and Theory 8 31 st July Tradeoffs and Theory (Continued) 9 5 th August Financing Mix: Choices and Optimal Mix 10 7 th August Choices and Optimal Mix (Continued) 11 12 th August Payout Policy 12 14 th August Mergers and Acquisitions 13 19 th August Mergers and Acquisitions (Continued) 14 21 st August Guest Lecture 4
Case Presentations and Discussion Schedule 15 2 nd September Group TBA Marriot Corp: WACC 16 4 rd September Group The Super Project 17 9 th September Group Hospital Corporation 18 11 th September Group American Home Products 19 16 th September Group Interco 20 18 th September Group Cooper Industries 21 23 rd September Group Adecco s Acquisition of Olsen 22 25 th September Group American Chemical 23 30 th September Group Friendly Cards 24 2 nd October Group Pinkerton s 25 8 th October Group Revision 26 10 th October Group Reserve Class Expectations and Workload The average student is expected to follow the following schedule of work load to successfully complete the course requirements (note that these are only guidelines): Lectures/classroom Reading/preparation for class Group case preparation Exam preparation Total 52 hours 52 hours 32 hours 44 hours 180 hours Course Materials and Course Resources Required Text: W.Carl Kester, Richard S. Ruback and Peter Tufano: Case Problems in Finance, 12 th edition, Irwin McGraw-Hill Note: You need to buy at least one book per group in order to prepare for the classes. I have placed several copies under limited-time lending in the library. Recommended Texts: Corporate finance texts such as Corporate Finance Theory and Practice 2 nd edition by Aswath Damodaran, Fundamentals of Corporate Finance by Brealey, Myers and Marcus and Intermediate Financial Management 8 th edition by Eugene Brigham and Phillip Daves; investments texts such as Investments by Bodie, Kane and Marcus. 5
Overheads: The first half of the class is primarily based on the text book by Aswath Damodaran. Overheads for the first part of the course will be put on the blackboard. These overheads can also be obtained from: http://pages.stern.nyu.edu/~adamodar/. Assessment All material covered in class is examinable (except where stated otherwise) by assignments, midterm quiz and the final examination. All important assessment information such as due dates and times, content, guidelines and so on will be discussed at lectures and via blackboard. Students are responsible for ensuring that they are aware of this information, keeping track of their own progress, and catching up on any missed classes. Task Weight Classroom contribution to case discussions 5% Case Presentation 10% Group case written report 20% Final examination 65% 100% The grading scheme used at Otago is: Course Requirements A+ 90-100 C+ 60-64 A 85-89 C 55-59 A- 80-84 C- 50-54 B+ 75-79 D 40-49 B 70-74 E <40 B- 65-69 You have to pass the final exam to pass the course. Class Representatives The class (or student) representative system is an avenue for encouraging communication and consultation between staff and students. It provides you with a vehicle for communicating your views on the teaching and delivery of the paper and provides staff with an opportunity to communicate information and gain constructive feedback from students. It contributes to the development of a sense of community within a department and it adds a further dimension to the range of support services offered to students. Volunteers for the role of class representatives will be called early in the semester. The OUSA invites all class representatives to a training session, conducted by OUSA, about what it means to be a class representative and some of the possible procedures for dealing with issues that arise. They also provide information on the services that OUSA offers and the role OUSA can play in solving problems that may occur. The OUSA provides support to class representatives during the semester. Departmental staff will also meet with class representatives during the semester to discuss general issues or matters they wish to have considered. 6
Dishonest Practice and Plagiarism Students should make sure that all submitted work is their own. Plagiarism is a form of dishonest practice. Plagiarism is defined as copying or paraphrasing another s work and presenting it as one s own (University of Otago Calendar 2011 page 224). In practice this means plagiarism includes any attempt in any piece of submitted work (e.g. an assignment or test) to present as one s own work the work of another (whether of another student or a published authority). Any student found responsible for plagiarism in any piece of work submitted for assessment shall be subject to the University s dishonest practice regulations which may result in various penalties, including forfeiture of marks for the piece of work submitted, a zero grade for the paper, or in extreme cases exclusion from the University. The University of Otago reserves the right to use plagiarism detection tools. Concerns about the Course We hope you will feel comfortable coming to talk to us if you have a concern about the course. The Course Coordinator will be happy to discuss any concerns you may have. Alternatively, you can report your concerns to the Class Representative who will follow it up with the departmental. If, after making approaches via these channels, you do not feel that your concerns have been addressed, there are University channels that may aid resolution. For further advice or more information on these, contact the departmental administrator or head of department. Disclaimer While every effort is made to ensure that the information contained in this document is accurate, it is subject to change. Changes will be notified in class. Students are encouraged to check with the lecturer if there are any doubts. It is the student s responsibility to be informed. 7