FIN-315 Corporate Finance

Course Description: This course builds on the material learned in the Principles of Finance course and further develops the necessary tools to help the manager analyze and solve financial problems in a business organization.  Topics include financial planning, asset valuation, capital budgeting, capital structure, financial analysis, dividend policy, corporate restructuring, and some aspects of international finance.  Also covered is the role of finance in the other functional areas of the business.

  • Prerequisite Course(s):  AC 320 Intermediate Accounting I

A. PROGRAM LEARNING OUTCOMES (PLOS)

The student will be able to:

  1. Demonstrate an understanding of basic concepts in organizational behavior                                               
  2. Demonstrate an understanding of the intricacies of marketing planning and overall marketing
  3. Demonstrate an understanding of the concepts underlying corporate financial decision making
  4. Demonstrate an understanding of the role of entrepreneurship and small business in the FSM economy
  5. Demonstrate basic knowledge of international business
  6. Demonstrate an understanding of economic development issues
  7. Demonstrate an understanding of statistical methods of sampling and estimating population statistics
  8. B. STUDENT LEARNING OUTCOMES (SLOS) - GENERAL

The student will be able to:

  1. Demonstrate a further understanding of the functional responsibilities of managers involved in the financial management, corporate financial performance and to fulfill their functional responsibilities.

SLO

PLO1

PLO2

PLO3

PLO4

PLO5

PLO6

PLO7

1

 

 

D,M

 

 

 

 

I = Introduced
D = Demonstrated
M = Mastered

B.STUDENT LEARNING OUTCOMES (SLOs) – SPECIFIC:

The student will be able to:

General SLO 1: Demonstrate a further understanding of the functional responsibilities of managers involved in the financial management, corporate financial performance and to fulfill their functional responsibilities.

 

Student Learning Outcomes

 

Assessment Strategies

1.1.Define the cost of capital. Explain the required rate of return and its components. Describe and discuss the importance of weighted cost of capital. Calculate the weighted cost of debt, equity and preferred stock. Explain the usefulness of beta concept. Discuss and compute the optimal capital budget and the cost of depreciation-generated funds, and their respective relationship with the cost of capital.

     

Pre-/Post-Testing

    1.2.Describe capital structure, leverage, business risk, financial risk, the value of the firm, optimal capital structure, and their connection with one another.

     

Pre-/Post-Testing

    1.3.Explain the nature of degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL). Demonstrate proficiency in making capital structure and stock pricing decisions with the use of EBIT-EPS and cash insolvency analyses. Discuss the effects of other factors in establishing capital structure policies.

     

Pre-/Post-Testing

    1.4.Explain dividend policy and the factors affecting it. Describe the various dividend policy approaches. Discuss how dividends are paid, and the effect of stock dividends, stock splits and share repurchase (as a dividend decision).

     

Pre-/Post-Testing

    1.5.Discuss working capital policy decisions involving investment and financing. Determine optimal levels of working capital investment and optimal proportions of short- and long-term debt. Describe the importance of operating cycle and cash conversion cycle; analysis of the joint impact of working capital investment and working capital financing decisions; receivable financing, trade credit, loans, and other instruments of indebtedness.   

     

Pre-/Post-Testing

    1.6. Explain the motives for holding liquid assets. Discuss optimal liquid asset balance, the objective of controlling cash collection and disbursements, methods of reducing cash collection time, slowing down cash disbursements, electronic fund transfers, and the ethical and legal boundaries of cash collection and disbursement decisions. Enumerate and illustrate the different criteria for selecting marketable securities.

     

Pre-/Post-Testing

    1.7.Define accounts receivable management. Explain the variables affecting optimal credit policy. Enumerate and expound on the steps in evaluating individual credit rating. Discuss and compute inventory-related costs and optimal levels of inventory investment using the various inventory control models.

 

Pre-/Post-Testing

    1.8.Define lease contracts and the parties involved therein. Enumerate the different classifications of leases. Explain lease decision process, rules and relevant factors. Discuss the nature of and relationship of term loans with leases.

     

Pre-/Post-Testing

    1.9.Define and explain the nature of derivative securities. Discuss options, its valuation concepts, variables affecting call option valuation, the Black-Scholes option valuation model, and call option on bonds and on common stock. Describe convertible securities, its features, managing long-term funding with convertibles, valuation of convertible securities, converting convertible securities and convertible securities with earnings dilution. Explain the meaning of warrants, its features, reasons for issuing warrants, valuation of warrants and warrants vs. convertible securities. Describe right offerings and interest rate swaps.  

     

Pre-/Post-Testing

    1.10. Define and discuss the nature of risk. Explain the reasons for employing various risk management techniques. Enumerate and describe risk management strategies.

     

Pre-/Post-Testing

    1.11.Discuss the theories of interest parity and relative purchasing parity. Define forward rates. Explain the fisher effect and the international fisher effect, the different categories of foreign exchange risk, and hedging.

 

Pre-/Post-Testing

    1.12. Discuss the nature of and the different types of corporate restructuring. Describe the process of merger and valuation of merger candidates. Demonstrate knowledge in analyzing leveraged buyouts. Explain the business failure, its causes and strategic alternatives to failing businesses.

Pre-/Post-Testing

D.COURSE CONTENT

  • The Cost of Capital
  • Capital Structure Concepts
  • Capital Structure in Management Practice
  • Divided Policy
  • Working Capital Policy and Short-term Financing
  • The Management of Cash and Marketable Securities
  • The Management of Accounts Receivable and Inventories
  • Lease and Intermediate Financing
  • Financing Derivatives
  • Risk Management
  • International Financial Management
  • Corporate Restructuring

E.METHODS OF INSTRUCTION

    • Lecture with Visual Aids (using available technology)
    • Group/Individual Assignments and Seatwork
    • Research/Case Analysis
    • Inviting Resource Speakers
    • Film Viewing
    • Provide student learning resources online

    F.REQUIRED TEXT(S) AND COURSE MATERIALS

    1. TEXTBOOK:
      • Moyer, MacGuigan and Kretlow: Contemporary Financial Management, 11th (or current) Edition (Parts 4 to 6 only), South-Western Cengage Learning, China: 2009.
    2. COURSE MATERIAL:
      • Calculator, pens, pencil and ruler

     G. REFERENCE MATERIALS

    Brealey,Myers & Allen: Principles of Corporate Finance 9th Edition, McGraw-Hill/Irwin, USA: 2007 (or most recent edition).
    Hickman, Hunter and Byrd: Foundations of Corporate Finance, 2e, South-Western Publishing: Ohio, 2002 (or most recent edition)
    Brigham and Houston: Fundamentals of Financial Management, 12th Edition, South-western Cengage Learning, USA: 2009 (or most recent edition).

    H. INSTRUCTIONAL COSTS

    None

    I. EVALUATION

    None

    J. CREDIT BY EXAMINATION

    None

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