School Of Business Administration

Syllabus

Spring 2012

Financial Policy and Planning (MBA 629)  

Instructor                  : Dr. D.K. Malhotra

Office                         : 102 Tuttleman  

Web Site                   : http://faculty.philau.edu/MalhotraD

Email                          : MalhotraD@philau.edu

Office Phone            : (215) 951-2813

Office Hours            : 10:00 a.m. - 11:30 a.m. Monday and  Wednesday or by appointment.

Required Text:

Corporate Finance by Ross, Westerfield, and Jaffe, McGraw Hill/Irwin Publishing Co., ninth edition (ISBN#978-0-07-310590-2)

Additional Recommended Readings:

The Wall Street Journal; Barron’s Paper; Corporate Finance

Course Description:

This course focuses on the investment and financing decisions of the firms. Topics include capital budgeting, cash management and cash flow analysis, capital structure, dividends, and international operations. Financial policy making is considered within the context of contemporary valuation and risk management theories. Various financial planning models are analyzed in the course.

Course Objective:

The objective of this course is to further enhance the student’s ability to approach and make financial decisions. This course is intended to be a blend of both the theoretical and practical aspects of financial decision making.

Course Outcomes:

Ø  Demonstrate proficiency in analyzing financial statements to identify the strengths and weaknesses of a firm

Ø  Develop the ability to analyze capital budgeting decisions of a firm using traditional capital budgeting techniques of discounted cash flow analysis

Ø  Demonstrate the ability to estimate the cash flows from a project

Ø  Develop the ability to analyze the relationship between risk and return and its impact on financial decision making

Prerequisites: All students must have completed MF 01, MF 02, and MF 05 or equivalents.

It is the students' responsibility to make certain that they have successfully completed these courses. If at any time during the semester it is learned that a student has not successfully completed these prerequisites, he/she will be dropped from the course receiving, neither credit nor tuition refund.

Requirements:

1. Attend class regularly.

2. Do Class Assignments.

3. Study class notes prior to next class and come prepared to the class to participate actively in discussions.

4. be able to take time pressure tests.

Attendance:

Attendance is mandatory. You are responsible for what is covered in the class and any absence on your part leaves you responsible for finding out what was presented in class. You will benefit a lot from the course by doing problems and reviewing concepts which are covered in the class. For every class that you miss without a valid excuse, there will be a penalty of two points from your final grade.

Grading:

Homework Assignments and

Case Studies                                                20%

Class Participation                          10%   

Mid-term Exam                                 35%

Final Exam                                      35%

No late homework will be accepted. No makeup exams will be given. If you miss an exam due to an unavoidable reason, the grade on the missed exam will be transferred to the final exam. THE FINAL EXAM IS COMPULSORY AND COMPREHENSIVE. DO NOT EXPECT ANY SCALING ON THE GRADES.

Case Reports: The cases should be presented in a manner acceptable in a large corporation. The decision as well as the qualitative and quantitative reasons for the decision should be communicated in a typed memo. The relevant information should follow the memo in table form with supporting notes showing calculations. Cases will be evaluated according to content, analysis, presentations, and continuity. If any two cases are identical, plagiarism will be assumed and no credit will be given to either case.

CASE ASSIGNMENT REQUIREMENT:

Case reports must be submitted as per the following format:

1.  Title Page:

            Name of the Case

            Prepared by

            Course Number

            Date

2.  Executive Summary

One half to one page summary of the issues involved and the strategy and recommendations must be included.

  3.  An analysis of the case on the basis of the questions given at the end of the case.  Your analysis of each question must include the following:

            Issues Involved

            Strategies to deal with those issues

            Recommendations with rationale

4.      Length of Case Preparation: 4-5 pages

5.    Papers are to be word-processed with correct grammar and punctuation.  Information in the papers must be properly documented.

6.    Guideline:  Consult other business communication books on business reports and case writings.

Academic Honesty:

Students are expected to perform according to a code of academic honesty that prohibits cheating on tests and plagiarizing others' work. Violation of this code may result in failure of the course.

Retention of Student Exams, Papers, etc:

Students’ materials will be retained for a minimum of four weeks into the subsequent semester. 

Grading Policy:

The following policy will be followed for assigning letter grades in this course.

93 and above(A); 90 - 92(A-); 87 - 89 (B+); 83 - 86(B);80 - 82(B-); 77 - 79(C+); 73 - 76(C); 70 - 72(C-) and Less than 70( F)

Tentative Course Outline:

01/12              Introduction to Corporate Finance

Ø  Introduction to the Course

Ø  Meaning of Corporate Finance

Ø  Significance of Corporate Finance

01/17              Introduction to Corporate Finance

Ø  The Corporate Firm

Ø  Goals of the Corporate Firm

Ø  Agency Relationship between Shareholders and Management

Ø  Ethics and Shareholder Wealth Maximization

01/19              Accounting Statements and Cash Flows

Ø  Meaning of Financial Statements

Ø  Significance of Financial Statement Analysis

Ø  Types of Financial Statements

o   The Balance Sheet

o   The Income Statement

o   The Working Capital

Ø  Financial Statement Analysis

01/24              Accounting Statements and Cash Flows

Ø  Financial Statement Analysis

01/26              Accounting Statements and Cash Flows

Ø  The Ratio Analysis

Ø  Du Pont Analysis

Ø  Limitations of Financial Analysis

01/31              Financial Statement Analysis

02/02              Capital Budgeting and Techniques

Ø  Meaning of Capital Budgeting

Ø  Types of Capital Budgeting Techniques

Ø  Payback Period Approach and Discounted Period Approach

02/07              Capital Budgeting Techniques

Ø  Net Present Value Approach

Ø  Internal Rate of Return

02/09              Capital Budgeting Techniques

Ø  Profitability Index; 

Ø  Modified Internal Rate of Return

Ø  Capital Rationing

02/14              Capital Budgeting Techniques

Ø  NPV versus IRR

Ø  NPV versus PI

Ø  Evaluating Projects with unequal lives

02/16              Capital Budgeting Techniques

Ø  Evaluating Projects with unequal lives

02/21              Project Cash Flow Analysis

Ø  Incremental Cash Flows

Ø  Inflation and Capital Budgeting

Midterm Exam

02/23              Project Cash Flow Analysis

Ø  Estimating Project Operating Cash Flows

Ø  Estimating Project Total Cash Flows

02/28              Project Cash Flow Analysis

03/01              Project Cash Flow Analysis

03/06              Strategy and Analysis in Using Net Present Value

Ø  Corporate Strategy and Positive NPV

Ø  Sensitivity Analysis

03/08              Strategy and Analysis in Using Net Present Value

Ø  Scenario Analysis, and

03/15 and 03/17 Spring Break

03/20              Strategy and Analysis in Using Net Present Value

Ø  Break-Even Analysis

03/22              Strategy and Analysis in Using Net Present Value

Ø  Decision Trees and Real Options to Analyze Capital Projects

03/27              Risk and Rates of Return

Ø  Meaning of Risk

Ø  Meaning of Return

Ø  Measurement of Return

Ø  Measurement of Risk

03/29              Risk and Rates of Return

Ø  Concept of Systematic and Unsystematic Risk

Ø  Concept of Beta and Systematic Risk

Ø  CAPM

Ø  Returns; Holding Period Returns; Risk; Discount

Ø  Rate for Risky Projects; Risk and Beta

Ø  Capital Asset Pricing Model (CAPM)

04/03           Risk and Capital Budgeting

Ø  Risk, Return, and Capital Budgeting

Ø  The Cost of Equity Capital; Determinants of Beta

04/05          Determining the Cost of Capital for a Project

04/10         Corporate Financing Decisions

Ø  Common Stock

Ø  Corporate Long-Term Debt

Ø  Patterns of Financing

04/12              Corporate Financing Decisions            

04/17              Capital Structure Decisions

Ø  The Choice between Debt and Equity

04/19            Capital Structure Decisions

Ø  Limits to the Use of Debt

04/24          Pecking Order Theory of Capital Structure

04/26          Dividend Policy of Firms

ADDITIONAL RECOMMENDED READING: