Prof. Anna Scherbina
UC Davis Graduate School of Management
Office: 126 AOB IV
We will explore how corporations make financial decisions through the analysis of Harvard Business School cases. Should a firm undertake a new investment opportunity, raise equity, acquire another firm, or conduct an IPO? How should small firms manage their working capital? How fast should a firm grow? These questions can be answered through incremental cash flow analysis technique, and in this course we will learn how to properly apply the technique to real-life situations. We will also examine how market imperfections, such as taxes, information asymmetries, and conflicts of interest, affect optimal corporate policies and what managers can do to increase the value of the firm.
1. Principles of Corporate Finance by R.A. Brearly, S. Myers, and F. Allen, 9th edition
2. Analysis for Financial Management by R.C. Higgins, 9th edition These textbooks will be used for background readings only, and earlier editions are also fine.
Cases will be available on study.net
Case analysis will involve building Excel models and conducting sensitivity analysis to assumptions in support of the final recommendation. Due to the labor-intensive nature of case preparation, I strongly encourage students to work in groups to get ready for class. Attendance and participation are essential parts of the learning process for this course. I expect students to attend all scheduled sessions and to come prepared to contribute to the discussion. Reading assignments should be read in advance of class, and everyone is expected to participate in discussions. If you have a compelling reason for missing a class, you should inform me in advance (email is best). Missing classes will affect your grade; missing any without reasonable cause is likely to do so significantly (see
participation grading scheme below). If you absolutely need to miss a class, please let me know ahead of time, and I will, most likely, ask you to submit written answers to case questions prior to the missed class and evaluate your participation based on this writeup. Participation
Class participation is a very important part of the learning process in this course. A major part of your final grade (40%) will be based on an assessment of the quality of your contributions to class discussions.
Quizzes will comprise of several multiple-choice questions and will be computer-based. Basic knowledge of all course material covered prior to the quiz will be tested. Students are free to consult their notes, textbooks, and the internet and will have one hour to complete each quiz.
Final Team Project
The class will be assigned a case to solve and each group will prepare a detailed written case analysis report.
Office hours are held by appointment.
Final grades will be computed as:
Final Team Project
The course is comprised of six modules:
Module 1: Financial statements, pro forma forecasting, and working capital management
1. R.C. Higgins, Analysis for Financial Management, Chapters 1 through 4 2. R.A. Brealey, S. Myers and F. Allen, Principles of Corporate Finance, Chapters 29 and 30
Module 2: Time value of money, capital investment valuation, cash flow recipe Recommended reading:
1. R.C. Higgins, Analysis for Financial Management, Chapter 7 2. R.A. Brealey, S. Myers and F. Allen, Principles of Corporate Finance, Chapters 2 and 3
Module 3: Cost of capital
1. R. A. Brealey, S. Myers and F. Allen, Principles of Corporate Finance, Chapters 8, 9, and 10
Module 4: Valuation ratios
1. R.C. Higgins, Analysis for Financial Management, Chapter 9 Module 5:...
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