Corporate Finance 2400-QFU1CFN

After finishing this course student should:
- know sources of capital and methods of its raising;
- be able to calculate cost of capital;
- be able to evaluate investment projects
- understand conflicts of interest and agency problems in a listed company;
- know in what circumstances a company should merge, pay dividend or repay its debt;
- be acquainted with problems concerning working capital management.
KW01, KW02, KU01, KU02

To get credit for this course student has to pass both: classes and lecture. During classes there are two written exams. The first exam (Class Exam part I - in April) is based on the first three (or four) problem sets solved during lab sessions. The second exam (Class Exam part II - in June) is based on the remaining problem sets. Class exams check problem solving skills and contain no purely theorethical questions. The latter form the main content of the Final Exam, that takes place in the Summer Exam Session and is based on the lecture and BMA textbook. Students must get credit from classes to take the Final Exam. That means a student must get at least 50 percent of total number of points that are possible to earn during both parts of the Class Exam. The Retake Class Exam will be held in September (both parts during one day with a break) during Summer Retake Exam Session before the Retake Final Exam. For each student there are no more than two attempts to take each exam. Failing to breach the 50% mark from the Class Exam results in loosing one attempt to take the Final Exam. The only opportunity to do it would be in September after passing the Class Exam. There will be no third terms for Class nor Final Exam except for the people who are ill and have an appropriate document written by a doctor.

Exam is based mostly on the content of the lecture and BMA textbook. Some knowledge from finance and accounting, that will not be thought during the course, is also important on the exam. This knowledge can be obtained from the following chapters of BMA book (or other courses):

2 How to Calculate present Values
3 Valuing Bonds
4 The Value of Common Stocks
7 Introduction to Risk and Return
8 Portfolio Theory and the Capital Asset Pricing Model
20 Understanding Options
21 Valuing Options
28 Financial Analysis

For revision and further reading, following positions may be helpful:

Franklin Allen, Richard Brealey, Stewart Myers, Principles of Corporate Finance, McGraw-Hill 2011. [BMA]
Aswath Damodaran, Investment Valuation 3rd Edition 2011. [D]
CFA Program Curriculum vol. 4, Corporate Finance and Portfolio Management, 2010.[CFA]

Below there is a list of obligatory chapters of BMA textbook in the order of appearance on the course. In brackets chapter’s number of the tenth and seventh edition (it is the same for first 22 chapters). PX means that the chapter is helpful when solving problem set X.

I Valuation (7 lectures).
Goal and Governance of the Firm [1]
Why Net Present Value Leads to Better Investment Decisions than Other Criteria [5] P1
Making Investment Decisions with Net Present Value Rule [6] P2
Risk and the Cost of Capital [9] P3

Supplementary recommended chapters on cost of capital from Damodaran’s Valuation (3rd Edition):
Chapter 4 The Basics of Risk
Chapter 7 Riskless Rates and Risk Premiums
Chapter 8 Estimating Risk Parameters and Costs of Financing

II Financing (5 lectures).

An Overview of Corporate Financing [14] P4
How Corporations Issue Securities [15] P4
Corporate Financing and the Six Lessons of Market Efficiency [13]
Payout Policy [16] P5
Does Debt Policy Matter [17] P6
How Much Should a Corporation Borrow? [18] P6, P7

III Financing and Valuation (2 lectures).

Credit Risk and the Value of Corporate Debt [23/24] P7
Financing and Valuation [19] P6

Supplementary recommended chapter on APV from Damodaran’s Valuation (3rd Edition):
Chapter [15] Firm Valuation: Cost of Capital and Adjusted Present Value Approaches

IV Other topics in corporate finance (1 lecture).
Working Capital Management [30/30,31,32] P8 that will be dealt during classes only
Corporate Restructuring [32/34] especially that part concerning bankruptcy.
Mergers [31/33] P9

Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system:

• Description of 2400-QFU1CFN in USOSweb