FIN 501 X01 Managerial Finance
Fall 2019 (3 Sept 2019 – 6 Dec 2019)
Keith Godfrey, [email protected]
Office hours: Thursdays 11:30am to 1:00pm in BUS 1.23(b) Teaching assistant: Sarishma Mallampati, [email protected]
Department of Finance and Statistical Analysis updated 28 August 2019
Description
This course introduces the essentials of corporate finance including the time value of money, valuation of financial assets such as bonds and stocks, raising capital through the issuing of financial securities, utilizing leverage, dividend policy, cash management, and derivative securities.
This course is intended to provide a framework for analyzing major types of financial decisions made by corporations. The lectures, readings, and assignments will provide an introduction to discounted cash flow analysis, financial asset valuation, capital budgeting, and option valuation problems.
Credit will not be given for FIN 501 when FIN 503 has been completed. Prerequisites: ACCTG 501, BUEC 503, and MGTSC 501.
Textbook
Fundamentals of Corporate Finance, 3rd Canadian Edition, by Berk, DeMarzo, Harford, Stangeland, and Marosi. Pearson Canada.
Learning Goals
Learning outcomes: Students should be able to understand and analyze the major types of financial decisions made by corporations, including use of discounted cash flow techniques in valuing financial assets and capital budgeting projects, how to incorporate various measures of risk into the analyses, and how to determine the correct cost of capital. They should be able to demonstrate a basic understanding of derivative securities such as financial options and the key areas of corporate finance theory such as capital structure and payout policy.
This course incorporates learning goals of the MBA Program: business fundamentals, teamwork and leadership skills, critical thinking and problem solving, communication skills, ethical awareness, quantitative and information processing skills, and global awareness.
Final grading in this class is based on demonstrated student achievement of the course learning outcomes and program learning goals.
Readings and Class Schedule
The proposed class schedule is as follows. The schedule may be modified as the semester progresses if topics take more or less time than planned. Readings and/or chapters from the text may be added or deleted at a later date. Please ensure you have read the relevant materials before each session.
Date Topic Chapter Reading (Berk et al.
either 2nd or 3rd Canadian Ed.) Sept 3 Introduction to Corporate Finance.
Review of Financial Statements.
Time value of money (single CFs).
Ch 1 Ch 2 Ch 3 Sept 10 Time value of money (CF streams).
Annuities. Perpetuities.
Interest Rates. Amortization.
Ch 4
Ch 5
Sept 17 Valuing bonds (debt). Ch 6 and section 21.3
Sept 24 Valuing stocks (equity).
Ch 7 Oct 1 Assignment 1 due.
Capital budgeting 1: Investment decision rules.
NPV. IRR. Unequal lives. Capital rationing.
Ch 8
Oct 8 Capital budgeting 2:
Incremental FCFs. Project analysis. Real Options. Ch 9
Oct 15 Midterm exam (in class on 15 October) Chs 1-8 and section 21.3 Oct 22 Risk and return. Capital markets. Portfolio choice. Ch 10, 11
Oct 29 Capital asset pricing model (CAPM) Weighted average cost of capital
Ch 11, Ch 12
Nov 5 Derivatives: Forwards, Futures, and Options Ch 13 and section 21.2
Nov 12 Reading week – no classes n/a
Nov 19 Assignment 2 due.
Raising capital in equity and debt markets
Ch 14, 15
Nov 26 Capital structure Ch 16
Dec 3 Payout policy.
Revision.
Ch 17
Dec 10 Final Exam (Tuesday December 10 at 6:00pm) All chapters listed above but
Grading
Course marks will be determined by combining points earned per the following table. This table shows the only component marks available to students. There will be no make-up marks or extra work to improve scores. Grades will be allocated after considering the relative performance of each student.
Participation 10% This assesses oral communication skills, ethical awareness, as well as critical thinking and problem solving and global awareness. Discussions will connect finance with other areas of business fundamentals.
Online Practice 10% Online practice is provided at https://GradeChaser.com. Please register using your ualberta.ca email address (if you have ever changed this email address please use the one that is currently registered on eClass).
You performance will be recorded at the times of each examination for the new material covered in that examination. The snapshot will be taken during or after each exam so that you can use GradeChaser during your revision.
In the event that you are granted a deferred exam, your deadline for the online practice will also be deferred to match the deferred exam.
Assignments 10% Teamwork assignments assess critical thinking and problem solving, teamwork and leadership, quantitative and information processing, and written communications. You will work in groups, and each group should make one submission for each assignment. While each student does not have to submit an individual solution, every student has an interest in knowing how to do the problems.
Assignments will be posted to the course website at least one week prior to the deadlines. Please solve these and submit them before the class on the deadline date. Hard copies are preferred. Electronic submissions are acceptable but must be properly formatted for printing (especially Excel spreadsheets). Late submissions will be awarded zero.
Midterm exam (120 minutes)
30% This assesses individual critical thinking and problem solving as well as quantitative and information processing skills, and the grasp of material in the first half of course.
The examinations are closed-book. See below for permitted materials.
Final exam (120 minutes)
40% This assesses critical thinking and problem solving as well as quantitative and information processing skills, and the grasp of the material in second half of course. While the final exam is intended to be non-cumulative, finance concepts are cumulative, and the questions will rely on concepts discussed during the first half of the course.
The examinations are closed-book. See below for permitted materials.
TOTAL 100%
Further Practice
In addition to the graded work, there are also end-of-chapter problems and exercises for you to work on throughout the term to gain a greater understanding of the material, without credit. The solutions will be placed on eClass.
Sample representative exam questions will be discussed in class prior to the examinations. A few past exam questions with randomization are also available at https://GradeChaser.com.
Permitted Examination Materials and Tools
You may bring pencils, pens, calculator(s), and transparent bottled water. You must display your ONECard identification on your desk.
The examinations are closed-book, meaning that no books or notes of any kind are allowed. A formula sheet will be provided to you in the examination. The formula sheet will be discussed in class and shown in advance on eClass.
Computers, notebooks, laptops, tablets, and any devices with communication facilities are not allowed in exams. Programmable calculators must be "de-programmed" before exams. If you want to retain programmed information then you should bring a different calculator to the exams.
Ensure that you know how to drive your calculator(s) and that your batteries have sufficient power. You can bring multiple calculators (for example you can bring both a financial calculator and a scientific calculator) provided that each calculator is deprogrammed. A financial calculator, while useful in this class, and allowed during exams, is not mandatory. A calculator that has yx, ex, and ln(x) functions should be sufficient.
Missed Assessment and Deferred Exams
The rules for attendance and absence from term work and examinations are specified in the Academic Regulations (http://calendar.ualberta.ca/content.php?catoid=6&navoid=806). If you know you are going to miss any term work or exam for a reason that is acceptable to the university (such as an incapacitating illness, a severe domestic affliction, a religious belief, and so on) then please supply supporting evidence as soon as possible. You will receive a mark of zero in a missed assessment unless appropriate supporting documentation is received in a timely manner.
If you miss online practice or a homework assignment for a reason that is acceptable to the university, please supply supporting documentation to me within two days (or as soon as practical in cases of extenuating circumstances). With appropriate evidence provided in time, the deadline for online practice can be changed, or its weight can be redistributed to the other components.
If you miss a midterm exam for a reason that is acceptable to the university, please supply supporting documentation to me within two days (or as soon as practical in cases of extenuating circumstances).
With appropriate evidence provided in time, you may be granted a deferred midterm exam or the weight from the missed exam may be distributed to the final exam.
Disagreements with Assessments
Grades will normally be available within one week of exams. Once a final grade is assigned, it will not be changed except in the case of a recording error. If you feel that your grade is incorrect, you must notify me in writing during the one-week period following the receipt of your grade. A request to have a question on your exam re-graded entails a request to have the entire exam re-graded. I may send your paper for remarking by a different marker, or I may invite you to come and witness me remarking the paper if your perception of your mark is substantially different from mine.
Contact and Email Policy
I will normally be available immediately after each class, and otherwise by appointment. My office hours are Thursdays from 11:30am to 1:00pm in room 1.23(b) of the Business School.
I will normally respond to emails within two business days. Please include the course in the subject line, and please include your name in the email. Be aware that emails sent to ualberta.ca addresses from non-university accounts may be rejected by the university’s spam filter and might not be received.
University of Alberta Rules
Policy about course outlines can be found in Course Requirements, Evaluation Procedures and Grading of the University Calendar.
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.
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).
