SUNWAY UNIVERSITY BUSINESS SCHOOL

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SUBJECT OVERVIEW

BAB 3208/FIN 3014: CORPORATE FINANCE


Course : Bachelor of Science (Hons) In Accounting and Finance
Subject Code and Title : BAB 3208/FIN 3014 Corporate Finance
Semester : March-June 2014
Contact Hours : 2 hours of lecture, 1 hour of workshop and 1 hour of tutorial
Lecturer and Tutor : Nicholas YC Lum
E-mail address : lumyc@sunway.edu.my
Office :
Telephone number : N.A.
Consultation Hours : By prior appointment only

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Subject Description

The emphasis of this subject is on how to enhance the value of a firm through various financial
decisions. It looks at the fundamental themes of corporate finance including the financing
decisions and market efficiency, payout policy and capital structure, corporate risk
management and issues related to mergers, corporate control and governance.

Subject Objectives

This subject aims to develop a broad understanding of the key areas of corporate finance as
well as the needs of national and international clients, and assist in the practical completion of
deals at all levels; and to achieve an understanding of how to integrate an organisations
mission as well as its strategic and financial objectives into a value-creating corporate finance
strategy. One is expected to read widely outside the textbook to gain a better appreciation of
the ever changing dynamics of the subject. Emphasis of the subject will be the application of
various concepts covered in this subject


Student Learning Outcomes (SLOs)
On completion of this subject, students are expected to be able to:
SLO1 Obtain transactions-oriented knowledge and enhance key analytical skills;
SLO2 Understand a broad range of organisational needs, both nationally and
internationally, to assist in the practical completion of corporate finance deals and
SLO3 Apply technical knowledge in real-life corporate finance and deal-making
scenarios.
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Programme Learning Outcomes (PLOs)
On completion of this programme, students are expected to be able to:
PLO1 apply fundamental business knowledge with a focus on accounting and finance;
PLO2 apply relevant tools and techniques used by industry to interpret data and
undertake business analysis;
PLO3 take into consideration social, cultural and environmental factors in making
business decisions;
PLO4 embed empathy, responsibility, integrity and professionalism in making business
decisions;
PLO5 function effectively as an individual and within a group as well as demonstrate the
responsibility and qualities of an effective leader;
PLO6 communicate and interact effectively with all levels of an organisation and the
wider community;
PLO7 systematically identify problems and provide efficient and effective solutions;
PLO8 manage information and engage in life-long learning; and
PLO9 apply managerial and entrepreneurial skills.

Mapping of Subject Learning Outcomes to Programme Learning Outcomes
Subject
Learning
Outcomes
Programme Learning Outcomes
PLO1 PLO2 PLO3 PLO4 PLO5 PLO6 PLO7 PLO8 PLO9
SLO1
SLO2
SLO3


Programme Objectives (POs)
This programme aims to:
PO1 produce employable business graduates or professionals with a sound knowledge
and understanding of accounting and finance;
PO2 produce business graduates who are ethical and responsible leaders or
managers;
PO3 produce business graduates with the skills and competencies in critical thinking
and problem solving;
PO4 produce business graduates with managerial and entrepreneurial skills; and
PO5 produce graduates who recognise the need to engage in life-long learning for
personal and professional growth and development.


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Mapping of Subject Learning Outcomes to Programme Objectives
Subject Learning
Outcomes
Programme Objectives
PO1 PO2 PO3 PO4 PO5
SLO1
SLO2
SLO3

Delivery Methods

Lectures are delivered with MS Power Point slides, websites or/and videos as a visual aid.
Each lecture covers certain aspects of a major topic. Students should note that while a lecture
is self-contained in terms of presentation, topics are closely interrelated and this
interconnectedness is essential to their understanding of the contents of this subject.

Tutorials are designed to supplement lectures and to enhance students understanding of the
various topics. The exercises are to be completed in class. Students are expected to
participate actively in all tutorials.

Workshops are designed to further enhance students learning through selected subject areas
where students might have difficulty in understanding or need further clarification. Some
workshops will include case studies and students are expected to read and work on those
case studies before coming to the workshops for effective learning.

Assessment

Students are continuously assessed in two main ways, namely, a final examination and
coursework components. The allocation of marks for each assessment mode is as follows:


No. Method of Assessment Total
1. Coursework:
Group presentation Due in Week 12
Group assignment Due in Week 11
Tutorial participation

10%
15%
5%
2. Final Examination 70%


Coursework (30%)

Group presentation: The students will provide a presentation on their group assignment.
Students will be accessed on various criteria and the lecturer will
provide with more information in class. The key to this exercise is to
ensure the group work as a team and communicate effectively their
findings to the wider audience.

Group assignment: The assignment requires students to analyse an important theory,
review a related journal article and apply the knowledge gained to a
real world situation. The lecturer will provide more information during
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the class. Five students are grouped in teams and all members of the
same team will be awarded same marks for their combined written
submission. The aim of the assignment is to enable students to gain
awareness of academic research beyond what is included in the
textbook and to apply it in the real world. Group details including
information of team leader and team members will need to be
confirmed by week 2.

Tutorials: Students are required to actively participate in discussion during
classes and to answer tutorial questions. Purpose of these activity is
to engage in fruitful academic discussion during class.


Final examination (70%)

The final examination, of three hours in duration, will consist of five questions and students
are required to answer any four of the five questions. All questions carry the same number of
marks each i.e. 25 marks each.

Students who are unable to participate in any of the coursework, due to hospitalisation leave
etc., should seek permission from the lecturer to avoid being awarded zero marks.



IMPORTANT

Marks awarded are provisional and subject to change, and are only deemed final once
approved by the Board of Examiners.


Late submission penalty clause

The deadline for submission of assignment is to be strictly adhered to. No extension of time
will be allowed except in extenuating circumstances, e.g. medical reasons. Students who wish
to apply for an extension of time for the submission of assessment item(s) after the due date
shall put in writing the request, together with validated documentary evidence to support the
application.

If an assignment is submitted after its due date (and without approval for extension), the
following penalty will be imposed:

One to two calendar days late : 20% deducted from the total marks awarded.
Three to five calendar days late : 40% deducted from the total marks awarded.
More than five calendar days late : Assignment will not be marked.




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Academic malpractice

Plagiarism, whether inadvertent or deliberate, shall include the following:

Word-for-word copying of sentences or whole paragraphs from one or more sources,
or presenting substantial extracts from books, articles, thesis, other unpublished work
such as working papers, seminar and conference papers, internal reports, computer
software, lecture notes or tapes, without clearly indicating their origin.

Using very close paraphrasing of sentences of whole paragraphs without due
acknowledgement in the form of reference to the original.

Submitting another students work in whole or in part.

Use of other persons ideas, work or research data without acknowledgement.

Collusion, whether inadvertent or deliberate, shall include the following:

Submitting an individual assignment that was jointly prepared by the candidate and
any other third party, e.g. other students, family, professionals, or tutors/lecturers.

Submitting a group assignment that was jointly prepared by the group and any
external party, e.g. family, students from other subjects, or professionals.

Copying each others work and passing it off as an individual effort.

Please refer to Student Handbook for Diploma and Undergraduate Programmes or
Blackboard for details about academic malpractice penalties.


Subject outline

The following is the subject outline by topics with recommended readings indicated against
each of them. Readings may be added during the course as and when appropriate.


Week Topics and Activities Readings
1
24/3-28/3
Introduction to Corporate Finance
The goals of the corporate firm
Agency theory and corporate governance
An overview of corporate finance

BMA Chapter 1 and
14
2
31/3-4/4
How corporations issue securities
Venture capital
Initial Public Offering
Private placements

BMA Chapter 15
3
7/4-11/4
Determination of cost of capital
Understand the different types/levels of risk
project, company and equity
Issues in determination of Weighted Average
Cost of Capital
Different risk horizons and multiple discount
rates

BMA Chapter 9
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Week Topics and Activities Readings
4
14/4-18/4
Dividend policy
Choice of payout policy
Information content in dividends
The payout controversy
BMA Chapter 16
5
21/4-25/4
Does debt policy matter?
Modigliani and Miller Proposition 1
Modigliani and Miller Proposition 2
The Weighted-Average Cost of Capital
BMA Chapter 17


6
28/4-2/5
How much should a company borrow?
Cost of financial distress- direct and indirect
Trade off theory of capital structure
Pecking order theory
BMA Chapter 18 and
Penman Chapter 13
7
5/5-9/5
Financing and valuation
Valuing business
Using WACC in practice
Adjusted Present Value
BMA Chapter 19 and
Penman Chapter 16
8
12/5-16/5

Mergers & acquisitions
Real and dubious motives
Estimating gains and costs
Mergers and the economy
BMA Chapter 31
9
19/5-23/5

Mid semester break


10
26/5-30/5
Corporate restructuring
Leveraged buyout
Fusion and fission in corporate finance
Private equity
BMA Chapter 32 and
Penman Chapter 17
11
2/6-6/6
Credit risk and value of corporate debt
Probability of default
Predicting probability of default
Value at Risk
BMA Chapter 23 and
Penman Chapter 20
12
9/6-13/6
What types of debts?
Security and seniority
Debt covenants
Private placements and project finance
BMA Chapter 24
13
16/6-20/6
Managing risk
Value of risk management
Various types of financial instruments to
hedge risk
BMA Chapter 26
14
23/6-27/6
Special topics of Corporate Finance Handouts
15
30/6-4/7

Revision



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Tutorial and workshop sessions

Week Chapter Discussion questions
1
24/3-28/3
Not applicable None
2
31/3-4/4
BMA Chapter 1 and 14 1-8,1-12, 14-15, 14-17

3
7/4-11/4
BMA Chapter 15 15-14, 15-19, 15-21

4
14/4-18/4
BMA Chapter 9 9-22, 9-24, 9-27
Updates 1 of group assignment
5
21/4-25/4
BMA Chapter 16 16-21, 16-23, 16-29

6
28/4-2/5
BMA Chapter 17 17-21, 17-22, 17-28
Updates 2 of group assignment
7
5/5-9/5
BMA Chapter 18 and
Penman Chapter 13

18-23, 18-26, 18-27, M13.2*

8
12/5-16/5

BMA Chapter 19 and
Penman Chapter 16

19-23, 19-25, 19-27, M16.2*
Updates 3 of group assignment
9
19/5-23/5
Mid semester break


10
26/5-30/5
BMA Chapter 31 31-9, 31-13, 31-19
Updates 4 of group assignment
11
2/6-6/6
BMA Chapter 32 and
Penman Chapter 17

32-17, 32-20, M17.1*
12
9/6-13/6
Group presentation
13
16/6-20/6
BMA Chapter 23 and
Penman Chapter 20

23-5, 23-10, 23-14, 23-16,
M20.1*
14
23/6-27/6
BMA Chapter 24 24-13, 24-29, 24-31 and mini
case of The Shocking demise of
Mr. Thorndike

15
30/6-4/7

BMA Chapter 26 26-16, 26-29, 26-33, 26-35


Note: * refers to Penman (2013), e.g. M13.2* refers to the mini case at the end of Chapter 13
and mini case number 2. Those without * refers to Brealey et al. (2011) (or BMA) e.g. 1-12
refers to BMA Chapter 1 problem set 12.


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Reading List

Text books

Brealey, R.A., Myers, S.C. and Allen, F. (2011), Principles of Corporate Finance, Global
Edition, McGraw Hill International Edition.

Penman, S.H. (2013), Financial Statement Analysis and Security Valuation, 5
th
Edition,
McGrawHill International Edition.

Other References

Berk, J. and DeMarzo , P.(2013) Corporate Finance, 3
rd
Edition, Pearson Global Edition.

Palepu, K.G. and Healy, P.M. (2013) Business Analysis and Valuation using Financial
Statements, 5
th
Edition, Thoson South Western, International Edition.

Ross, S. A., Westerfield, R.W., Jaffe, J. F. and Jordan B. D. (2014). Corporate Finance - Core
Principles and Applications. 4
th
Edition. McGraw-Hill.

Bodie, Z., Kane, A. and Marcus, A.J. (2011) Investments and portfolio management, 9
th
Edition
(Global), McGraw Hill Irwin.


Other refereed journals:

1. Review of Financial Studies
2. The Journal of Finance
3. Journal of Accounting and Economics
4. Journal of Financial and Quantitative Analysis
5. Bank for International Settlements Working Papers
6. Journal of Money, Credit and Banking
7. Federal Reserve Bank of New York Staff Reports
8. Journal of Corporate Finance