Topics: Finance, Financial statements, Warren Buffett Pages: 21 (2997 words) Published: February 13, 2014
FINA 6201 - Financial Theory and Policy
Note: This is the text-only version of this week’s lecture. All media (i.e. videos, flash presentations, and PowerPoints) and learning activities (i.e. assigned readings, assignments, and discussions) are accessible only through the online course.

FINA 6201 - Financial Theory and Policy
Course Description
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Course Overview—Course Description
The primary objective of this course is to build the understanding of finance theory and application skill sets required to formulate financial policy on capital investment and valuation decisions in a dynamic and global business environment. Upon completion of this course, students will be able to apply finance principles to stock and bond valuation, valuation of the firm, and capital investment decisions. Students will also be able to apply risk-return principles to the estimation of a firm’s cost of capital, portfolio risk, and capital asset pricing applications. Students will become familiar with the extant models that are used in financial applications today, including the Net Present Value rule, the Capital Asset Pricing Model, capital structure models, dividend policy, and the Efficient Markets Hypothesis.

Course Objectives and Expected Outcomes
The objectives and expected outcomes of this course are to:
1. Introduce the theory of financial markets and value as a motivation for the study of finance. 2. Review basic financial statements and analysis of financial statements. 3. Introduce the theory of financial markets and review the mathematical and mechanical skills necessary to make value-based decisions.

4. Apply discounted cash flow methodology to the valuation of stocks and bonds. 5. Develop decision criteria leading to the efficient investment in real assets. 6. Introduce risk, return, and the relationship to the firm’s opportunity cost of capital. 7. Introduce the concept of a firm’s cost of capital and explore empirical issues surrounding cost of capital estimation.

8. Understand the efficient markets hypothesis and explore the interaction of finance theory and finance practice.
9. Understand the development of theory of an optimal capital structure and dividend policy.

Course Resources

Corporate Finance: Core Principles and Applications, 4th. Edition, 2013, Ross, Westerfield, Jaffee, and Jordan (RWJJ).
Course packet containing cases:


Financial Performance of Dell Computers

FINA 6201 - Financial Theory and Policy
The Investment Detective
Warren E. Buffett
Phuket Beach Hotel: Valuing Mutually Exclusive Capital Projects Nike Inc.: Cost of Capital
Access to and a basic working knowledge of Excel.
Working knowledge of a financial calculator.

Sessions and Days of the Week
The course is divided into five (5) weekly sessions. Due dates for assignments are stated in Day numbers. Day 1 is Monday, the first day beginning each weekly session. Day 1 Monday
Day 2 Tuesday
Day 3 Wednesday
DA4 Thursday
Day 5 Friday
Day 6 Saturday
Day 7 sunday
"End of Day" Note: Assignments, papers, quizzes, exams, and other graded assessments are understood to be due at the end of the day specified, unless otherwise noted. To accommodate students in different U.S. time zones, “end of day” specifically refers to 3:00 a.m. E.T. of the following morning. For example, a due date of “Week 1, Day 7” refers to a deadline of Week 2, Day 1 at 3:00 a.m. E.T. (midnight on the West Coast). However, if a time deadline is specified, it supersedes this understanding.

Course Outline
Week 1 Learning Activities
Lesson 1
Reading 1
Lesson 2
Reading 2

Discussion 1

Assignment 1
Discussion 2

Assignment 2


Due Date

Review course content for Lesson 1
Read Chapter 1 of our text
Review course content for Lesson 2
Read Chapters 2 and 3 of our text.
Read Chapter 18 of our text - pages 551-559 beginning...
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