Unit title: Corporate Finance

Unit code: FIN501

Credit points: 8cp
Unit description: This course is a broad based and concise introduction to the key
concepts and practical aspects of financing and investment decisions
focusing on core issues in finance and their relationship to the business
world from the working executives perspective.
Unit objectives: This unit is designed to enable students to:
Knowledge
1. Describe the setting and identify the three key decision making
issues in financial management
. !xplain the process of fund raising through various common
instruments in the capital market
". #nderstand the financial aspects of selecting business activities
$. %ecognise the pros and cons of debt&e'uity(financing) dividend pay(
out and practices in the field
*. #nderstand the rationale for mergers + ac'uisitions and leveraged
buy(outs
Skills
1. ,erform Discount -ash .low and related techni'ues for analy/ing
securities valuation and pro0ect appraisal
. !stimate the return on e'uity and debt(financing cost) including the
1eighted 2verage -ost of -apital 312--4 as a hurdle rate for
corporate investment
". Determine appropriate mix and type of strategies for financing
$. Determine the amount and type of dividend policy
*. 5onitor the cash and working capital management
6. 7aluing a business for the purpose of strategic re(alignment
Vales!"ttitdes
1. -ritically match financial strategies with corporate development
. 8ensitive and analytical approach towards 9risk premium assumed
by business activities
". 2lert to the need for monitoring short(term financial plan with
actual progress and feedback from business activities
1
Unit otco#es:
1. :ffer useful technical and management advice for investing in and
financing business activities.
. .ormulate financing strategy and dividend policy in line with
corporate development trends and financial environment
$eadings: $eco##ended te%ts
1. De5ello) ;. 3<<"4) -ases in .inance) 5c=raw(>ill
. 5yddelton) D. 3<<<4) 5anaging ?usiness .inance) ,rentice >all
". @eown) 2.;.) 5artin) ;.D.) ,etty) ;.1. + 8cott ;r.) D... 3<<$4)
.inancial 5anagement ,rinciples and 2pplications) 1<
th
edn.)
,rentice >all
Spple#entar& readings
1. ?all) %. 31AA$4) :n the Development) 2ccomplishments and
Bimitations of the Theory of 8tock 5arket !fficiency) 5anagerial
.inance < 31AA$ issue &"4) p "($8
. ?realey) %.2. + 5yers 8.-. 3<<"4) ,rinciples of -orporate
.inance' C
th
edn.) 5c=raw(>ill
". Damodaran) 2. 31AA84) 2pplied -orporate .inance: 2 #sers
5anual) ; 1iley + 8ons Dnc.
$. 5aeseneire) 1.D. + @euleneer B. 3<<"4) 7aluation of -ompanies)
in %ecent Trends in 7aluation) edited by Buc @euleneer + 1illem
7erhoog B @euleneer) ;ohn 1iley + 8ons Dnc.
*. 5yers) 8. 3<<14) .inance Theory and .inancial 8trategy) in The
Eew -orporate .inance: 1here Theory 5eets ,ractices) "
rd
edn.)
edited by %.=. -hew ;r.) <<1) 5c=raw(>ill
6. 1ard) @. + ?ender) %. 3<<4) -orporate .inancial 8trategy)
nd
edn.) ?utterworth(>einemann
C. 7arghese) 8. 3<<4) 8trategic -onsiderations ( 5aking the %ight
-hoice) in FThe -orporate .inance >andbookG edited by ;onathan
%euvid) David Drwin + !dward =eorge) <<) @ogan ,age Btd
8. 8tern) ;.5.) ;acobs) B.>.) -hew ;r.) D.>. 3<<"4) The %evolution in
-orporate .inance) $
th
edn.) ?lackwell ,ublishers
A. -hew) D.>. 3<<<4) The Eew -orporate .inance) "
rd
edn.) 5c=raw
>ill&Drwin

;ournals
1. 2sia ,acific ;ournal of 5anagement
. ?usiness 1eek
". .ar !astern !conomic %eview
$. .ortune
*. .orbes
6. >arvard ?usiness %eview
C. ;ournal of 5arketing
8. Eewsweek
A. 8loan 5anagement %eview
1<. Time
11. The !conomist
"
Unit contents: ()*ICS
1+ (,e setting and isses o- -inancial #anage#ent decision #aking
Dntroduction on the role and ob0ective of finance executives
%ole playing on the three ma0or decisions
Debate on the market efficiency
$eadings:
5yddelton -hapter 1
Damodaran -hapter 1)H
?all) %. 31AA$4
.+ /asic -inance and -inancial assets valation
D-. is the key of this topic) how it is applied in various contexts are
illustrate through short exercises with the aid of !xcel) comments on
its misuses and limits are found in 5yers article and finally simple
stock valuation example to illustrate the important of 0udgment in
security valuation
8hort exercises using !xcel on:
Time value of money) !ffective interest rate) E,7) annuity) dividend
growth model) ,ricing of coupon bond
1orked example on:
8tock valuation
$eadings:
5yddelton *.") 11.") 1$."
5yers) 8. 3<<14
$
0+ Capital 1arket
2 brief account on the funding organi/ation and the appropriate
application of various types of instruments.
Dntroduction on the market and instruments
=roup presentation on the short(term) long(term financial
markets
$eadings:
5yddelton -hapter 1) A + 1<
1ard -hapter A
2+ 3eter#inants o- retrns on invest#ents
2 theoretically heavy but unavoidable topic) students are expected to
read the class note on 5,T and -2,5. .ollow through a step(by(
step example from information gathering to generating return rate
estimates.
-omponents of interest rate) risk premium of investments I brief
summary
1orked example on cost of e'uity I -2,5
1orked example on cost of loan I -redit rating
$eadings:
5yddelton -hapter
Damodaran -hapter ") $
*
5+ /asic capital project appraisal
,ro0ect appraisal techni'ues and their strengths and weaknesses
illustrated through simple in(class exercise and mini(case study
2%%) ,?) D%%) E,7 + ,D
5ini case : -omparison of -apital ?udgeting techni'ues
$eadings:
5yddelton -hapter *
De5ello case 1
4+ Capital bdgeting
8tudents construct a business plan for their product under the
instructors guidance and a mini(case study serve to demonstrate
how to perform scenario analysis
1orked example from sale pro0ection to ?usiness ,lan
5ini case on: 8cenario 2nalysis
$eadings:
5yddelton -hapter 6
De5ello case 1$
6
5+ 3ebt 6 78it& Financing
2 simple worked example to compare the impact of debt vs.
e'uity financing
2 brief 'ualitative discussion on the possible conse'uences of
too little or too much debt taken by a company and common
strategies to change D&! ratio
.inancing strategy and paid(out policy in line with corporate
development
$eadings:
5yddelton -hapter 1<) 11 + 1
1ard -hapter
9+ 3eter#ining cost o- capital
>ow to determine the 12--J The answer is demonstrated
through the two mini case studies.
$eadings:
5yddelton -hapter 11
De5ello case 1* + 16
C
:+ Capital Strctre 3ecision
The impact of capital structure on 12-- is demonstrate through an
example and the two mini cases:
Book ?efore Kou Beverage
Debt versus !'uity .inancing
$eadings:
5yddelton -hapter 1
De5ello case 1A
10+ 3ividend *olic&
8tudents are asked to find out how much and in what way should the
earning be returned to shareholders in the cases:
Ds Dt 5uch 2do 2bout EothingJ
Dividend ,olicy
$eadings:
5yddelton -hapter 1
De5ello case 1
1ard -hapter 6
8
11+ Cas, #anage#ent
8tudents learn how to carry out cash budgeting by stepping through
the case:
=etting :ur 2ct Together: -ash ?udgeting
$eadings:
5yddelton -hapter "
De5ello case "
1.+ ;orking capital #anage#ent
The mini(case: Timing Ds !verything
serves to illustrate the improvement on financial efficiency
through aligning inflow with outflow and production with
anticipated demands
$eadings:
5yddelton -hapter $
De5ello case
A
10+ <everaged /&ot =</)s> 6 (akeovers' $estrctring
The issues associated with 5 + 2 and the decision to li'uidate or
reorgani/e a company are illustrated in the two mini(cases.
$eadings:
5yddelton -hapter C + 1"
De5ello case < + 8
12+ Co#pan& Valation
!xamples of %: 3%eal :ptions4 application are briefly discussed
using decision tree techni'ues as a means to augment the short
coming of D-. techni'ues
$eadings:
5yddelton -hapter 1$
5aeseneire) 1. D and @euleneer) B. 3<<"4
1<