Course Number: BU250
Course Title: Principles of Finance
STUDENT LEARNING OUTCOMES
General
The course will provide the student an in-depth understanding of financial
aspects of business. By the end of the course, the student is expected to:
i)
Comprehend the role of financial
management in the overall operations of the firm.
ii)
Demonstrate competency in analyzing
the financial statements of a firm.
iii)
Demonstrate competency in solving
problems related to finance in areas such as risk and return, time value of
money, bond and
stock valuation, forecasting, cash flow projection and other
financial areas.
Specific
The student will be able to:
1.
Explain the importance of finance in all
major disciplines and its usefulness to individuals in their roles as
consumers, investors,
employees, employers, and citizens.
2.
Differentiate between financial and accounting perspectives on the financial
balance sheet.
3.
Explain the goal of the corporation - shareholder wealth maximization.
4.
Explain corporate finance concepts including fixed and residual claims, bonds
and stocks, markets, agency problems, and
information asymmetry.
5.
Explain how product markets, financial markets, and the government create both
opportunities and limitations for corporations.
6.
Enumerate the characteristics of financial markets.
7.
Differentiate between primary and secondary markets and between money and
capital markets.
8.
Explain the importance of cash flow and describe why net income is not an
accurate measure of cash flow.
9.
Name
and apply several methods to estimate a firm's historical and future cash flows.
10.
Solve
for the present value or the future value of single cash flows using simple,
compound, or continuously compounded interest.
11.
Solve
for either the number of periods or the interest rate for a single cash flow
problem where all other variables are known.
12.
Solve
multiple cash flow problems by recursively applying the single cash flow
technique.
13.
Compute annuities, annuities due and perpetuities.
14.
Solve
for the expected return of a project AND for the price or expected return of a
coupon bond and of a share of preferred or
common stock.
15.
Explain how capital markets, especially stock markets, function.
16.
Explain how the risk of diversified portfolios, through the portfolio effect, is
reduced to market risk only and describe how in
competitive markets, only market
risk is reflected in securities prices.
17.
Explain the application of beta.
18.
Explain the security market line and apply the capital asset pricing model in
security pricing.
19.
Define the basics of the corporate investment decision.
20.
Explain how markets create investment opportunities, what firms must do to
capitalize on those opportunities and how investing
fits in with corporate
strategy.
21.
Enumerate various investments that contain options that analysts should consider
in project evaluation.
22.
Estimate the weights used in the weighted average cost of capital (WACC), based
on market values.
23.
Estimate the after-tax cost of debt.
24.
Estimate the cost of preferred stock.
25.
Estimate the cost of equity using three methods: the capital asset pricing model
(CAPM) approach, the discounted cash flow
approach, and the debt-equity risk
premium approach, and adjust these estimates for the costs of raising capital
from outside
sources.
26.
Compute the WACC.
27.
Explain the risk-adjusted, discount rate (RADR) and when it should be used
instead of the WACC.
28.
Estimate an RADR using the pure-play technique.