FIN 301 – Introduction to Finance Department of Finance and Statistical Analysis
Winter 2020
1. Lectures & Seminars/Labs
Lectures Seminars/Labs
Instructor(s) Lukas Roth Cristina Infante and Yusuke Tsujimoto
E-mail [email protected] [email protected]
Office Hours Tuesday (BUS 2-32E), 1:00-2:30pm; or by appointment
Monday (BUS 2-33), Wednesday (BUS 2-33), and Friday (BUS 4-27), 10:00-12:00pm; or by appointment
Lectures Tuesday and Thursday, 3:30-4:50pm, CCIS 1-430
See Bear Tracks for details
(https://www.beartracks.ualberta.ca/) 2. Course Objective
This course is intended to provide a market-oriented framework for analyzing the major types of financial decisions made by corporations. Lectures, readings, and assignments will provide an introduction to discounted cash flow techniques, financial asset valuation, capital budgeting principles and problems, enhance your understanding of dividend policy, capital structure and related corporate finance issues, and introduce you to derivative securities. This course provides the basis for all other classes in finance as well as the basic tools each business student needs to be successful in her/his career. In addition, regardless of a student’s chosen field of study, this course will provide basic tools for personal financial decision making.
3. Textbook
Fundamentals of Corporate Finance, Third Canadian Edition; Berk, DeMarzo, Harford, Stangeland, and Marosi, Pearson Canada, 2019. [Note, you can also use the Second Canadian Edition (2016) of the textbook.]
4. Class Material, Office Hours, E-mails, and Announcements
All relevant class material, including slides, assignments, practice problems, solutions, etc. are available in a shared Google Drive folder. An invitation email will be sent to each student’s ualberta.ca email address at the beginning of the semester. Content is only accessible through your [email protected] account; aliases (e.g., first.lastname@
ualberta.ca) do not work.
Office hours are as stated as above and by appointment. In most cases, we will also be available to answer questions after class.
We are also available by e-mail. Your e-mail must be sent to [email protected] and must be addressed to a specific instructor in the subject line. E-mails not addressed to a specific instructor will be deleted. On business days (Monday to Friday) we have 48 hours to answer your questions but we will try to answer as fast as we can. We may need more than 48 hours on weekends. In most cases, we answer all questions in the order they were received.
Important announcements (about exams, assignments, etc.) will be posted on eClass and sent to your student university e-mail address ([email protected]).
5. Assignments, Exams, and Grading
Course grades will be determined by combining points on homework assignments, midterm exams, and a final exam.
If you miss a midterm exam, I require supporting documentation pertaining to the absence within two business days following the missed midterm exam (or as soon as possible with regards to the circumstances underlying the absence).
If you can provide supporting documentation, the weight of the missed midterm will be applied equally to the remaining exams. If you do not have supporting documentation, you will receive a zero.
If you feel that your midterm mark is incorrect, you must notify me in writing during the one-week period following the posting of the midterm marks. After that, the problem will not be researched. Please note that a request to have a question on your midterm re-graded entails a request to have the entire exam re-graded.
Deferred final examinations will be allowed for students following University procedures for obtaining deferrals.
Students interested in a deferred final exam should consult the Undergraduate Office. More information can be found in Academic Regulations, University Regulations and Information for Students of the University Calendar.
In the event that a deferred final exam is granted, the deferred final exam will be on Tuesday, May 19 at 10:00am.
The weights given to assignments and exams are:
Assignments Weights (% of Total Grade)
Homework 6% (1% each)
Midterm exam #1 25%
Midterm exam #2 25%
Final exam 44%
Total 100%
Each homework assignment is due on the date indicated in this syllabus. Answers to assignments will be submitted via eClass. Submissions are accepted until 4pm on the due date. Late submissions will not be accepted for any reason.
If you fail to submit a homework assignment on time, you will receive a grade of zero for that assignment unless you provide supporting documentation of the reason for failing to submit your homework. With supporting documentation, the weight of the missed homework will be transferred equally to the remaining homework assignments (or to the final if you miss the last assignment).
There are a total of six homework assignments. These assignments are intended to provide additional practice of key concepts and are important for exam preparation. Each of these assignments accounts for one percentage point of the overall course mark. For each assignment, students who score 25% or more pass the assignment and receive one percentage point; students who score less than 25% receive a zero. The solutions to the assignments will be posted and it is highly recommended that you compare your answers to the posted solutions. Homework due dates are as follows:
Homework Due Date (by 4pm)
1 Jan 27
2 Feb 3
3 Feb 14
4 Mar 11
5 Mar 23
6 Apr 8
The course is roughly divided into three parts. The first midterm (~65 minutes; held during regular class time) covers all the material of the first part of the course. The second midterm (again ~65 minutes; held during regular class time) covers the material of the second part. And for the final exam (120 minutes; held during the final exam period) approximately 75% of the questions cover the material of the third part of the course, and the rest of the questions equally cover the (essential) material of the first two parts. Sample midterm and final exams will be provided.
You cannot hope to absorb the material by “cramming” the week before the exams! While the final will focus on the material covered following the midterm, finance is a cumulative discipline. Students with a poor understanding of the midterm material are unlikely to do well on the final. All assigned sections of the text should be read. You cannot assume that all the material needed for the exams will be covered in class.
performance of the class, an A can be obtained with fewer than 90% of the total points. Students accumulating 50%
or more of the total points available will not receive a grade below D (guaranteed pass). Students accumulating fewer than 50% of the total points available are at risk to receive a grade of F.
The following table may be helpful:
Accumulated Points Final Grade 95% or more Guaranteed A+
At least 90% Guaranteed A
50%-89% Guaranteed pass (depending on class performance A-D)
Less than 50% At risk to fail (F)
Once assigned, the final grade in the class will not be changed except in the case of a recording or grading error.
The University provides a translation between the letter grades and the numeric equivalents used for calculating GPA’s can be found in Evaluation Procedures and Grading System, Academic Regulations of the University Calendar.
6. Exam Procedures
Bring your onecard, calculator, and writing implements to all exams. Be sure to bring your own calculator and be sure that the batteries have sufficient power. You are allowed to use one 8½11 inch “cheat sheet” and can use both sides of the sheet. There are no restrictions on what you can put on this “cheat sheet.”
7. Calculator, End-of-chapter Problems, and General Information
Your calculator is a tool and cannot substitute for an understanding of the problem solving process. Instructors will not spend any time (in class or in office hours) explaining the use of your calculator. A financial calculator (e.g., the Texas Instruments BA II PLUS) is not required; all exam questions can be solved without a financial calculator.
I have designated some end-of-chapter problems that I think reflect important aspects of the material. These problems are not graded or collected. In the past, some students have found it useful to work on these problems as we cover the corresponding topics in class. Others felt that they spent valuable time on end-of-chapter problems at the expense of the material covered in class. In other words: how much time, if any, you spend on solving the end-of-chapter problems will depend on how helpful you find them in understanding the material covered in class. The answer key for all of the problems is available in the Google Drive folder.
Missed classes are solely your responsibility. If you want to know what was covered in a class that you missed (including announcements), you will have to find a classmate who attended class and is willing to share her/his notes.
I have doubts about any student’s ability to pass this course if she/he fails to attend class. Regular class attendance is expected.
Audio or video recording, digital or otherwise, of lectures, labs, seminars or any other teaching environment by students is allowed only with the prior written consent of the instructor or as a part of an approved accommodation plan. Student or instructor content, digital or otherwise, created and/or used within the context of the course is to be used solely for personal study, and is not to be used or distributed for any other purpose without prior written consent from the content author(s).
Policy about course outlines can be found in Course Requirements, Evaluation Procedures and Grading of the University Calendar.
8. Academic Integrity
The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behaviour (online at www.governance.ualberta.ca) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University.
I expect honesty and integrity from my students. Cheating of any sort will be dealt with as sternly as University policy allows.
All exams and homework assignments are individual works. To help you judge what we consider acceptable and non- acceptable collaboration on individual assignments, consider the following examples of DOs and DON’Ts:
DOs DON’Ts
• Discuss the course material with other students
• Ask classmates for help when you are stumped
• Offer help to other students
• Do your own work
• Participate in study groups
• Participate on the discussion board (but do not disclose full or partial solutions to individual assignments; however, giving hints, explanations, and clarifications is acceptable, of course)
• View or copy someone else’s full or partial homework solutions
• Allow someone else to view or copy your full or partial homework solutions
• Exchange full or partial homework solutions (e.g., via e-mail, Facebook groups, other social networks, etc.)
• Communicate with anyone other than the course officials during the exams
• Gain access to course materials from prior semesters that have not been provided to all students by the instructor. This may include exams, assignments, and problem solutions
9. Seminar Schedule
Please note there are no seminars on days not listed in the table below.
Seminar Topics Sections and Dates
Monday Wednesday Friday
1 Time value of money I Jan 13 Jan 15 Jan 10
2 Time value of money II Jan 20 Jan 22 Jan 17
3 Bond valuation Jan 27 Jan 29 Jan 24
4 Equity valuation Feb 3 Feb 5 Jan 31
5 Project valuation I Feb 24 Feb 26 Feb 28
6 Project valuation II Mar 2 Mar 4 Mar 6
7 Risk and return Mar 9 Mar 11 Mar 13
8 Options Mar 30 Mar 25 Mar 27
9 Capital structure Apr 6 Apr 1 Apr 3
10. Course Outline
Below is a schedule to guide you in your readings and class preparation. Since some topics may take more or less time than planned, we may deviate slightly from this schedule. The end-of-chapter problems refer to the Third Canadian Edition of the textbook. Note, if you are using the Second Canadian Edition of the textbook, an older syllabus can be found on Google Drive that shows the chapter and end-of-chapter problem numberings for the Second Canadian Edition.
Date Topics Textbook Readings Recommended End-of-chapter Textbook Problems
Jan 7 Introduction Ch. 1 (all)
Jan 9 Time value of money Ch. 3 (all) Ch. 3: 9-12, 15, 16, 18-31
Jan 14 Time value of money Ch. 4 (all) Ch. 4: 5-19, 21, 22, 24-36, 39-43
Jan 16 Time value of money Ch. 5.1 and 5.2 Ch. 5: 1-6, 11-17, 25
Jan 21 Bond valuation Ch. 6 (all); Ch. 15.2 and 15.3 Ch. 6: 1-3, 9, 11-16, 19, 21-23, 25, 26 Jan 23 Bond valuation Ch. 6, Appendix C (Duration); Ch. 5.3 (Inflation) Ch. 5: 28, 29
Jan 28 Equity valuation Ch. 7.1-7.4 Ch. 7: 4-11, 13-16, 17-21, 36, 39ab
Jan 30 Equity valuation Ch. 7.7
Feb 4 Investment decision Ch. 8 (all) Ch. 8: 1-10, 13, 14, 17, 19, 20, 23-26, 33, 34, 36
Feb 6 Exam review Feb 11 Midterm exam #1
Feb 13 Project valuation Ch. 9.1-9.4 Ch. 9: 4, 8, 9, 10b, 13, 15-17
Feb 17-21 Reading week Feb 25 Project valuation Feb 27 Project valuation
Mar 3 Risk and return Ch. 10 (all) Ch. 10: 1-4, 10, 11a, 12acd, 18
Mar 5 Risk and return Ch. 11 (all) Ch. 11: 1-5, 8-13, 16, 19-21, 23-25, 28-36
Mar 10 Risk and return Mar 12 Options
Exam review
Ch. 13.1-13.5 and 13.7 Ch. 13: 2-7, 9-11
Mar 17 Midterm exam #2 Mar 19 Options
Mar 24 Options Cost of capital
Ch. 12.1-12.5 Ch. 12: 1-3, 6-13, 15-24 (YTM = EAR unless stated
otherwise)
Mar 26 Capital structure Ch. 16 (all) Ch. 16: 3abc, 4-6, 12, 13, 15-19, 21
Mar 31 Capital structure
Apr 2 Lessons in personal finance Apr 7 Exam review
Apr 15 Final exam