COURSE DESCRIPTION
The course will provide the student an in-depth
understanding of financial aspects of business such as financial statement
analysis, risk and rates of return, time value of money, valuation of bonds and
stocks, financial forecasting, working capital policy, credit management,
inventory management, short-term financing, and projecting cash flow.
A: GENERAL COURSE OBJECTIVES
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.
B: SPECIFIC OBJECTIVES
By
the end of the course, 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.
C: COURSE CONTENT
- Financial Model of the Corporation
- Markets, Value, and the Firm
- Estimating Cash Flows
- Time Value of Money
- Time Value Applications: Security Valuation and Expected Returns
- Risk and Return in the Capital Markets
- Capital Budgeting: Investing to Create Value
- Cost of Capital
D: TEXTBOOK
Foundations of Corporate Finance, 2nd edition,by Hickman, Hunter, and Byrd. South-Western
Publishing: Ohio,
2002. (Chapters 1-8)
E: REQUIRED COURSE MATERIALS
Business calculator
F: METHODS OF INSTRUCTION
Lectures (including guest
speakers from the local financial community), class discussions, projects, and
various individual and group assignments.
G: EVALUATION:
Assessment will be in the form of projects, quizzes,
homework, individual and group assignments, and exams given throughout the
semester. Grades will be assigned based
on the following percentage of total points received from projects, quizzes,
homework practice sets, and exams.
90 - 100% =
A; 80 - 89% = B; 79 - 79% = C; 60 - 69% = D; 59% and under = F
H: CREDIT BY EXAMINATION AVAILABLE FOR THE
COURSE
None
I: ATTENDANCE POLICY
The College attendance policy
shall be applied.
J: ACADEMIC HONESTY POLICY
The College academic honesty
policy shall be applied.