FINC 6290 Financial Strategy, Section 3
Fall 2 2013
Elizabeth A. Risik, PhD
This course will be a final, comprehensive finance offering that will make use of cases and/or simulations to enhance the real-world applicability of the finance degree and to integrate all previous coursework. Prerequisites
Prerequisites: completion of all other required courses for the major. Course Level Learning Outcomes
1. Students can calculate the value of fixed income securities Students can compute bond prices for use in unstructured case analysis. Applications include cost of capital computations for a corporation with a variety of divisions, optimal capital structure, leveraged buyouts, etc. 2. Students can calculate the value of equity securities
Students can propose an appropriate value for equity in unstructured case analysis. Student can prepare a report detailing the impact of earnings growth, dividend payments and other factors on common stock values observed in a simulation. 3. Students can discuss market functioning and the role efficient markets play in security valuation Students can discuss market efficiency issues in case studies. They can identify situations that lead to market inefficiency (capital restrictions, market frictions, etc.) and develop plans to address or create value from the inefficiency. 4. Students can analyze capital budgeting decisions using standard methodologies Students can prepare a capital budgeting analysis justifying decisions made during the finance simulation. Students can also prepare case analyses addressing complex capital budgeting issues such as: large project financing, project selection with capital restrictions or the relationship between valuation with real options and discounted cash flows. 5. Students can explain the impact of capital structure decisions on financial performance and cost of capital Students can determine the optimal debt-equity ratio needed to minimize cost of capital and maximize profitability in the finance simulation. They can also recommend capital structure decisions as part of case analysis. Possible topics include: leveraged buyouts and the cost of financial distress and the use of payout policy to alter capital structure. 6. Students can identify agency problems within a corporation and formulate strategies to address them Students can make recommendations on actions the board of directors could/should take in order to mitigate the agency conflicts that exist in case studies.
1. Coursepack from Harvard Business Publishing, available at http://cb.hbsp.harvard.edu/cbmp/access/22840833 2. Select textbook chapters, available under Selected Readings in the course’s Canvas page. 3. Simulation from Harvard Business Publishing, to be made available later in the course. 4. Financial Calculator, such as Texas Instruments BA II Plus
Other materials may be selected from finance cases, journal articles, and web-based resources. Selected materials will be made available online, in class, or students may be required to look up the source.
Supplemental Materials (Recommended; Not Required):
Microsoft Excel or other spreadsheet program
Access to the Wall Street Journal
Supplemental Textbooks (Not Required):
Titman, S. & J. Martin, Valuation: The Art and Science of Corporate Investment Decisions, 2nd Edition, Prentice Hall, 2010. Gaughan, P., Mergers, Acquisitions and Corporate Restructurings, 5th Edition, Wiley 2010. Bruner, R., Applied Mergers and Acquisitions, Wiley, 2004.
Grades will be a function of performance on case studies, two exams, an in-class simulation exercise, and participation at both the group and class levels.
Final grades may be curved based on the ultimate distribution of points.
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